GreenTree Hospitality Group Ltd.
Annual Report 2022

Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022.
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from                       to
Commission file number 001-38425
GreenTree Hospitality Group Ltd.
(Exact name of Registrant as specified in its charter)
Cayman Islands
(Jurisdiction of incorporation or organization)
1228 Zhongshan North Road, Putuo District
Shanghai 200065
People’s Republic of China
(Address of principal executive offices)
Contact Person: Dr. Yiping Yang, Chief Financial Officer
+86-21-3617-4886
1228 Zhongshan North Road, Putuo District
Shanghai 200065
People’s Republic of China
* (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbols
Name of each exchange on which registered
American depositary shares, each representing one Class A ordinary
share Class A ordinary shares, par value US$0.50 per share *
GHG
New York Stock Exchange, Inc.
*
Not for trading, but only in connection with the registration of American Depositary Shares representing such Class A ordinary shares pursuant to the requirements
of the Securities and Exchange Commission.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
67,416,046 Class A ordinary shares were outstanding as of December 31, 2022
34,762,909 Class B ordinary shares were outstanding as of December 31, 2022
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
  ☐ Yes   ☒ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
  ☐ Yes   ☒ No
Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their
obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.
  ☒ Yes   ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
  ☒ Yes   ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Emerging growth company ☒

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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the
extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.        ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards
Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.      ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP  ☒
International Financial Reporting Standards as issued
by the International Accounting Standards Board
Other ☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17  ☐ Item  18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes  ☒ No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.
☐ Yes  ☐ No

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1
GREENTREE HOSPITALITY GROUP LTD.
FORM 20-F ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 2022
Page
PART I
4
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
4
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
4
ITEM 3. KEY INFORMATION
4
ITEM 4. INFORMATION ON THE COMPANY
42
ITEM 4A. UNRESOLVED STAFF COMMENTS
85
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
86
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
102
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
110
ITEM 8. FINANCIAL INFORMATION
112
ITEM 9. THE OFFER AND LISTING
113
ITEM 10. ADDITIONAL INFORMATION
114
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
122
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
123
PART II
125
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
125
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
125
ITEM 15. CONTROLS AND PROCEDURES
126
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
127
ITEM 16B. CODE OF ETHICS
127
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
127
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
127
ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
128
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
128
ITEM 16G. CORPORATE GOVERNANCE
128
ITEM 16H. MINE SAFETY DISCLOSURE
128
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
128
ITEM 16J. INSIDER TRADING POLICIES
129
PART III
129
ITEM 17. FINANCIAL STATEMENTS
129
ITEM 18. FINANCIAL STATEMENTS
129
ITEM 19. EXHIBIT INDEX
129

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2
Conventions that Apply to this Annual Report on Form 20-F
In this annual report, unless otherwise indicated:
●
“ADR” or “ADRs” are to the American depositary receipts, which, if issued, evidence our ADSs;
●
“ADSs” are to our American depositary shares, each of which represents one (1) Class A ordinary share;
●
“China” and the “PRC” are to the People’s Republic of China, excluding, for the purposes of this annual report only, Taiwan,
the Hong Kong Special Administrative Region and the Macao Special Administrative Region;
●
“GreenTree Inns” brand are to hotels operated under the GreenTree Inns and GreenTree Inns Express brands;
●
“leased-and-operated hotels” are to hotels that we lease or own the premises and operate;
●
“franchised-and-managed hotels” are to hotels that we manage pursuant to various franchise agreements;
●
franchise agreements are to franchising agreements, management entrustment contracts and/or brand consulting contracts (as
applicable);
●
“RMB” or “Renminbi” are to the legal currency of China;
●
“ramp up stage” are to hotels in operation that have been open for six or fewer months;
●
“RevPAR” are to revenue per available room, which is calculated by multiplying our hotels’ average daily room rate by its
occupancy rate;
●
“shares” are to, collectively, our Class A ordinary shares and Class B ordinary shares, par value US$0.50 per share;
●
“Tier 1 cities” are to the term used by the National Bureau of Statistics of China and refer to Beijing, Shanghai, Shenzhen and
Guangzhou;
●
“Tier 2 cities” are to the 32 major cities, other than Tier 1 cities, as categorized by the National Bureau of Statistics of China,
including provincial capitals, administrative capitals of autonomous regions, direct-controlled municipalities and other major
cities designated as “municipalities with independent planning” by the State Council;
●
“Tier 3 and lower cities” are to cities in China other than Tier 1 cities and Tier 2 cities;
●
“US$,” “U.S. dollars,” or “dollars” are to the legal currency of the United States;
●
“U.S. GAAP” are to accounting principles generally accepted in the United States; and
●
“we,” “us,” “our company” and “our” are to GreenTree Hospitality Group Ltd., our Cayman Islands holding company, and its
subsidiaries, as the context requires.
This annual report on Form 20-F includes our audited consolidated financial statements for the years ended December 31, 2020,
2021 and 2022, and as of December 31, 2021 and 2022.
Our ADSs are listed on the New York Stock Exchange under the symbol “GHG.”

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3
Currency Translations
This annual report on Form 20-F contains translations of Renminbi amounts into U.S. dollars at specific rates solely for the
convenience of the reader. Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in
this annual report on Form 20-F were made at a rate of RMB6.8972 to US$1.00, the exchange rate set forth in the H.10 statistical release
of the Federal Reserve Board on December 30, 2022. We make no representation that the Renminbi or U.S. dollar amounts referred to in
this annual report on Form 20-F could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any
particular rate or at all.
Special Note Regarding Forward-Looking Statements
This annual report contains forward-looking statements that involve risks and uncertainties, including statements based on our
current expectations, assumptions, estimates and projections about us and our industry. The forward-looking statements are contained
principally in the sections entitled “Item 3. Key Information — D. Risk Factors,” “Item 5. Operating and Financial Review and
Prospects,” “Item 4. Information on the Company — B. Business Overview” and “Item 4. Information on the Company — B. Business
Overview — Regulatory Matters” in this annual report. These statements involve known and unknown risks, uncertainties and other
factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the
forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as “may,”
“will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar
expressions. The forward-looking statements included in this annual report relate to, among others:
●
our goals and growth strategies;
●
our future business development, financial condition and results of operations;
●
trends in the hospitality industry in China and globally;
●
competition in our industry;
●
fluctuations in general economic and business conditions in China and other regions where we operate;
●
the regulatory environment in which we and our franchisees operate; and
●
assumptions underlying or related to any of the foregoing.
This annual report also contains market data relating to the hospitality industry in China, including market position, market size, and
growth rates of the markets in which we participate, that are based on industry publications and reports. Statistical data in these
publications and reports also include projections based on a number of assumptions. The hospitality industry in China may not grow at
the rates projected by market data, or at all. The failure of these markets to grow at the projected rates may have a material adverse effect
on our business and the market price of our ADSs. If any one or more of the assumptions underlying the market data turns out to be
incorrect, actual results may differ from the projections based on these assumptions. In addition, projections, assumptions and estimates
of our and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due
to a variety of factors, including those described in “Risk Factors” and elsewhere in this annual report. You should not place undue
reliance on these forward-looking statements.
The forward-looking statements made in this annual report relate only to events or information as of the date on which the
statements are made in this annual report. Except as required by law, we undertake no obligation to update any forward-looking
statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated
events. You should read this annual report and the documents that we have referred to in this annual report and have filed as exhibits to
the registration statement, of which this annual report is a part, completely and with the understanding that our actual future results may
be materially different from what we expect.

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4
PART I
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not required.
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
Not required.
ITEM 3.
KEY INFORMATION
A.
Reserved
B.
Capitalization and Indebtedness
Not required.
C.
Reasons for the Offer and Use of Proceeds
Not required.
D.
Risk Factors
Risks Related to Doing Business in China
Adverse changes in the Chinese economy could have a material adverse effect on the hospitality industry in China which could
adversely affect our business.
We conduct all of our operations in China and all of our revenues are derived from our operations there. As the travel and hospitality
industry is highly sensitive to business and personal discretionary spending levels, it tends to decline during general economic
downturns. Accordingly, our results of operations, financial condition and prospects are subject to a significant degree to economic,
political and legal developments in China. The Chinese economy differs from the economies of most developed countries in many
aspects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange
and allocation of resources. While China’s economy has experienced significant growth in the past 30 years, growth has been uneven
across different regions and among various economic sectors of China. The growth rate of China’s GDP decreased in the past few years.
We cannot assure you that China’s economy will continue to grow, or that if there is growth, such growth will be steady and uniform. If
there is a slowdown, such a slowdown could have a negative effect on our business. There is also a possibility that China’s economic
growth rate may materially decline in the near future, which may have adverse effects on our financial condition and results of
operations. Risk of a material slowdown in China’s economic growth rate may be based on several current or emerging factors,
including: (i) occurrence of unusual circumstances; (ii) overinvestment by the government and businesses and excessive credit offered by
banks; (iii) a rudimentary monetary policy; (iv) excessive privileges to state-owned enterprises at the expense of private enterprises; (v)
the dwindling supply of surplus labor; (vi) a decrease in exports due to weaker overseas demand; (vii) failure to boost domestic
consumption; and (viii) challenges resulted from international situations.

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We face various legal and operational risks and uncertainties as a company based in and primarily operating in China.
We face various legal and operational risks and uncertainties as a company based in and primarily operating in China. The PRC
government has significant authority to exert influence on the ability of a China-based company, like us, to conduct its business, accept
foreign investments or offer or continue to offer securities on a U.S. stock exchange. For example, we face risks associated with
regulatory approvals of offshore offerings, anti-monopoly regulatory actions, cybersecurity and data privacy, as well as the lack of
inspection from the U.S. Public Company Accounting Oversight Board, or PCAOB, on our auditors. The PRC government may also
intervene with or influence our operations as the government deems appropriate to further regulatory, political and societal goals. The
PRC government has published new policies that significantly affected certain industries such as the education and internet industries,
and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could adversely
affect our business, financial condition and results of operations. See “— Uncertainties with respect to the Chinese legal system could
adversely affect us.” Any such action, once taken by the PRC government, could cause the value of our securities, including our ADSs,
to significantly decline or become worthless.
Changes in the political and economic policies of the PRC government may materially and adversely affect our business, financial
condition and results of operations and may result in our inability to sustain our growth strategy.
The PRC economy differs from the economies of most developed countries in many respects, including the extent of government
involvement, level of development, growth rate, and control of foreign exchange and allocation of resources. Although the PRC
government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state
ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of
productive assets in China is still owned by the government. In addition, the PRC government plays a significant role in regulating
industry development by imposing industrial policies. The PRC government also exercises significant control over China’s economic
growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, regulating
financial services and institutions and providing preferential treatment to particular industries or companies.
While the PRC economy has experienced significant growth in the past, growth has been uneven, both geographically and among
various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the
allocation of resources. Some of these measures may benefit the overall PRC economy, but may also have a negative effect on us. Our
financial condition and results of operations could be materially and adversely affected by government control over capital investments
or changes in tax regulations that are applicable to us. The PRC government also has significant authority to exert influence on the ability
of an issuer with substantial operations in China, such as our company, to conduct securities offerings overseas and/or allow any foreign
investments in issuers with substantial operations in China, which could result in a material change in our operations and/or the value of
our ADSs. In particular, the China Securities Regulatory Commission has published the Trial Administrative Measures of Overseas
Securities Offering and Listing by Domestic Companies and several guidelines for the application of regulatory rules concerning
overseas offerings and listings, which exert more oversight and control over offerings that are conducted overseas and/or foreign
investment in China-based issuers with substantial operations in China. Such control could significantly limit or completely hinder our
ability to offer or continue to offer securities to investors and cause the value of our securities, including our ADSs, to significantly
decline or become worthless. See “— Uncertainties with respect to the Chinese legal system could adversely affect us.” In addition, the
PRC government has implemented in the past certain measures to control the pace of economic growth. These measures may cause
decreased economic activity, which in turn could lead to a reduction in demand for our services and consequently have a material adverse
effect on our businesses, financial condition and results of operations.

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Uncertainties with respect to the Chinese legal system could adversely affect us.
We conduct our business primarily through our subsidiaries in China. Our operations in China are governed by PRC laws and
regulations. Our subsidiaries are generally subject to laws and regulations applicable to foreign investments in China and, in particular,
laws applicable to foreign-invested enterprises. The PRC legal system is based on written statutes and their interpretation by the Supreme
People’s Court of the PRC. Unlike common law systems, prior court decisions may be cited for reference but have limited precedential
value. Since the 1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic
matters in general. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to
various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently-enacted
laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and
regulations are relatively new, and because of the limited volume of published court decisions and their nonbinding nature, the
interpretation and enforcement of these laws and regulations involve uncertainties and may not be as consistent and predictable as in
other jurisdictions. In addition, the PRC legal system is based in part on government policies and internal rules, some of which are not
published on a timely basis or at all, and which may have a retroactive effect. As a result, we may not be aware of our violation of these
policies and rules until after the violation occurs.
Furthermore, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of
resources and management attention. Since PRC administrative and court authorities have significant discretion in interpreting and
implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings
and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may impede our ability to enforce
the contracts we have entered into and could materially and adversely affect our business and results of operations.
The PRC government has significant oversight and discretion over the conduct of our business and may intervene with or influence
our operations as the government deems appropriate to further regulatory, political and societal goals. The PRC government has
published new policies that significantly affected certain industries such as the education and internet industries, and we cannot rule out
the possibility that it will in the future release regulations or policies regarding our industry that could adversely affect our business,
financial condition and results of operations. See “— We face various legal and operational risks and uncertainties as a company based in
and primarily operating in China.” Furthermore, the PRC government has also indicated an intent to exert more oversight and control
over securities offerings and other capital markets activities that are conducted overseas and foreign investment in China-based
companies like us. Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to
offer or continue to offer securities to investors and cause the value of our securities, including our ADSs, to significantly decline or
become worthless.
We could be adversely affected by political tensions between the United States and China.
Political tensions between the United States and China have escalated in recent years due to, among other things, the trade war
between the two countries since 2018, the COVID-19 outbreak, the PRC National People’s Congress’ passage of Hong Kong national
security legislation and decision of the National People’s Congress on improving the electoral system of the Hong Kong, the imposition
of U.S. sanctions on certain Chinese officials from China’s central government and the Hong Kong Special Administrative Region by the
U.S. government, the imposition of sanctions on certain individuals from the U.S. by the Chinese government and various executive
orders issued by former U.S. President Trump. Rising political tensions between China and the U.S. could reduce levels of trade,
investment, technological exchanges and other economic activities between the two major economies, which would have a material
adverse effect on global economic conditions and the stability of global financial markets. The measures taken by the U.S. and Chinese
governments may cause investors to lose confidence in Chinese companies and counterparties, including us.
Furthermore, there have been media reports on deliberations within the U.S. government regarding potentially limiting or restricting
China-based companies from accessing U.S. capital markets, and in January 2021 the New York Stock Exchange, or the NYSE, resolved
to delist certain China-based companies in compliance with an executive order issued in November 2020. These delistings have
introduced greater confusion and uncertainty about the status and prospects of Chinese companies listed on the U.S. stock exchanges.
Any further such deliberations or delistings may have a material and adverse impact on the stock performance of China-based issuers
listed in the United States such as us, and we cannot assure you that we will always be able to maintain the listing of our ADSs on a
national stock exchange in the U.S., such as the NYSE or the Nasdaq Stock Market, or that you will always be allowed to trade our
ADSs.

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7
Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your
investment.
The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of
currency out of China. We receive all of our revenues in RMB. Under our current structure, our income will be primarily derived from
dividend payments from our PRC subsidiaries. Shortages in the availability of foreign currency may restrict the ability of our PRC
subsidiaries to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency
dominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit
distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior
approval from SAFE, by complying with certain procedural requirements. However, foreign exchange transactions under our capital
account items are subject to significant foreign exchange controls and require approval from the SAFE or its local branches. The PRC
government may also at its discretion restrict access in the future to foreign currencies for current account transactions if foreign
currencies reserve falls below a certain level. If the foreign exchange control system prevents us from obtaining sufficient foreign
currency to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders,
including holders of our ADSs.
Fluctuations in exchange rates could result in foreign currency exchange losses and could materially reduce the value of your
investment.
The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in
political and economic conditions and the foreign exchange policy adopted by the PRC and other governments. On July 21, 2005, the
PRC government changed its policy of pegging the value of the RMB to the U.S. dollar. While the RMB appreciated approximately 6.3%
and 2.3%, respectively, against the U.S. dollar in 2020 and 2021, the RMB depreciated approximately 8.2% against the U.S. dollar in
2022. It remains unclear what further fluctuations may occur.
Substantially all of our revenues, costs and expenses are denominated in RMB. We are a holding company and we rely on dividends
paid by our operating subsidiaries in China for our cash needs. Any significant revaluation of the RMB may materially reduce any
dividends payable on, our ADSs in U.S. dollars. To the extent that we need to convert U.S. dollars we receive into RMB for our
operations, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive.
Conversely, if we decide to convert our RMB into U.S. dollars for business purposes, appreciation of the U.S. dollar against the RMB
would have a negative effect on the U.S. dollar amount.
Limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered
into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into
hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately
hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that
restrict our ability to convert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect
on your investment.
Rapid urbanization and changes in zoning and urban planning in China may cause our hotel properties to be demolished,
expropriated or otherwise affected.
China is undergoing a rapid urbanization process, and zoning requirements and other governmental mandates with respect to urban
planning of a particular area may change. When zoning requirements or other governmental mandates change with respect to the areas
where our hotels are located, the affected hotels may need to be demolished or removed. As a result, we may have to relocate our hotels
to other locations. We have experienced such demolition and relocation in the past and we may encounter additional demolition and
relocation cases in the future. Our hotels could suffer from demolitions or interruptions due to zoning or other local regulations in the
future. Any such demolition and relocation could cause us to lose primary locations for our hotels and cause the licenses and permits held
by the hotels facing demolition to not be renewed or even be revoked, and we may not be able to achieve comparable operational results
following the relocations. While we may be reimbursed for such demolition and relocation, we cannot assure you that the
reimbursement, as determined by the relevant government authorities, will be sufficient to cover our direct and indirect losses.
Accordingly, our business, results of operations and financial condition may be adversely affected.

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8
Furthermore, the PRC government has the statutory power to acquire or demolish any land in the PRC for reason of changes in
urban planning or zoning or otherwise. In such events, we may be forced to relocate or close our hotels. Although we might be paid
compensation for such forced acquisition, demolishment or closure, the amount of compensation to be awarded to us may not cover our
losses and adversely affecting our operations.
Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option
plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
In December 2006, the People’s Bank of China promulgated the Administrative Measures of Foreign Exchange Matters for
Individuals, which set forth the respective requirements for foreign exchange transactions by individuals (both PRC or non-PRC citizens)
under either the current account or the capital account. In January 2007, the State Administration of Foreign Exchange issued
implementing rules for the Administrative Measures of Foreign Exchange Matters for Individuals which, among other things, specified
approval requirements for certain capital account transactions such as a PRC citizen’s participation in the employee stock ownership
plans or stock option plans of an overseas publicly listed company. Pursuant to the Notice of the State Administration of Foreign
Exchange on Issues concerning Foreign Exchange Administration of the Overseas Investment and Financing and the Round-trip
Investment Made by Domestic Resident through Special-Purpose Companies, or Circular 37, issued on July 4, 2014, PRC residents who
participate in share incentive plans in overseas non-publicly listed SPVs due to their position as director, senior management or
employees of the PRC subsidiaries of the overseas SPVs may submit applications to SAFE or its local branches for the foreign exchange
registration with respect to such overseas SPVs.
On February 25, 2012, the State Administration of Foreign Exchange promulgated the Circulars on Issues concerning the Foreign
Exchange Administration for Domestic Individuals Participating in Equity Incentive Plans of Overseas-Listed Company, or the Stock
Option Rules. Under these rules, PRC citizens or foreigners who have lived within the PRC for at least one year or, collectively, the PRC
optionees, who participate in an equity incentive plan of an overseas publicly listed company are required to register to handle issues
such as foreign exchange registration, account establishment, funds transfer and remittance, and entrust an overseas institution, or the
“Overseas Trustee” to handle issues like exercise of options, purchase and sale of corresponding stocks or equity and transfer of
corresponding funds. A “Domestic Agency” shall be a domestic company participating in the equity incentive plan or a domestic
institution which is qualified for asset custody business as chosen by us according to PRC law.
We adopted our 2018 share incentive plan in January 2018. Our board of directors has authorized the issuance of up to 9,000,000
Class A ordinary shares upon exercise of awards granted under our 2018 share incentive plan. See “Item 6. Directors, Senior
Management and Employees — Share Incentive Plan.” We and the PRC optionees who participate in the 2018 share incentive plan will
be subject to these regulations, as such, the 2018 share incentive plan provides that the PRC optionees shall not exercise their options nor
shall they purchase or subscribe for our shares before our company becomes a publicly listed company in the United States. After our
initial public offering in the U.S. we have advised our employees and directors participating in the 2018 share incentive plan to handle
foreign exchange matters in accordance with the Stock Option Rules. We cannot provide any assurance that we or the PRC optionees of
our share incentive plans have complied or will comply with the requirements imposed by the Stock Option Rules. If we or our PRC
optionees fail to comply with these regulations, we or our PRC optionees may be subject to fines and other legal or administrative
sanctions, and our ability to further grant shares or share options under our share incentive plans to, and to adopt additional share
incentive plans for, our directors and employees may be restricted. Such events could adversely affect our operations.
Further, a notice concerning the individual income tax on earnings from employee share options jointly issued by Ministry of
Finance, or the MOF, and the State Taxation Administration, or the STA (previously known as State Administration of Taxation, or the
SAT), on March 28, 2005, and its implementing rules, provide that domestic companies that implement employee share option programs
shall (i) file the employee share option plans and other relevant documents to the local tax authorities having jurisdiction over them
before implementing such employee share option plans; (ii) file share option exercise notices and other relevant documents with the local
tax authorities having jurisdiction over them before exercise by the employees of the share options, and clarify whether the shares
issuable under the employee share options mentioned in the notice are the shares of publicly listed companies; and (iii) withhold taxes
from the PRC employees in connection with the PRC individual income tax. To comply with the requirement, we will file the 2018 share
incentive plan with the relevant local tax bureau.

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It may be difficult for overseas regulators to conduct investigation or collect evidence within China.
There are significant legal and other obstacles in China to providing information needed for regulatory investigations or litigation
initiated by regulators outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the
securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation
with the securities regulatory authorities in the Unities States involves uncertainty. Furthermore, according to Article 177 of the PRC
Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct
investigation, evidence collection and other activities within the territory of the PRC. While detailed interpretation of or implementation
rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or
evidence collection activities within China may further increase difficulties faced by you in protecting your interests.
Our employment practices may be adversely impacted by the labor contract law of the PRC.
The PRC National People’s Congress promulgated the Labor Contract Law which became effective on January 1, 2008 and was
amended on December 28, 2012, and the State Council promulgated implementing rules for the labor contract law on September 18,
2008. The labor contract law and the implementing rules impose requirements concerning, among others, the execution of written
contracts between employers and employees, the time limits for probationary periods, and the length of employment contracts. The
interpretation and implementation of these regulations are still evolving, our employment practices may violate the labor contract law
and related regulations and we could be subject to penalties, fines or legal fees as a result. If we are subject to severe penalties or incur
significant legal fees in connection with labor law disputes or investigations, our business, financial condition and results of operations
may be adversely affected.
The Labor Contract Law prohibits an employer to establish staff dispatching companies to place workers with themselves or their
subsidiaries. We have established a subsidiary which is the employer of most our employees of other subsidiaries. This subsidiary has
entered into a service outsourcing arrangement with other relevant subsidiaries of ours. Since the current labor dispatch regulation does
not clearly define the distinction of labor dispatch and service outsourcing business, our service outsourcing arrangement could be
considered as labor dispatch by the relevant PRC government authorities and our abovementioned subsidiary might be regarded as
dispatching entity and therefore subject us to fines, or termination of such outsourcing arrangement.
In accordance with the PRC Social Insurance Law and the Regulations on the Administration of Housing Fund and other relevant
laws and regulations, China establishes a social insurance system and other employee benefits including basic pension insurance, basic
medical insurance, work-related injury insurance, unemployment insurance, maternity insurance, housing fund, and a handicapped
employment security fund, or collectively the Employee Benefits. An employer shall pay the Employee Benefits for its employees in
accordance with the rates provided under relevant regulations and shall withhold the social insurance and other Employee Benefits that
should be assumed by the employees. For example, an employer that has not made social insurance contributions at a rate and based on
an amount prescribed by the law, or at all, may be ordered to rectify the non-compliance and pay the required contributions within a
stipulated deadline and be subject to a late fee of up to 0.05% per day. If the employer still fails to rectify the failure to make social
insurance contributions within the stipulated deadline, it may be subject to a fine ranging from one to three times the amount overdue.
Under the Regulations on the Administration of Housing Fund, PRC companies must register with applicable housing fund
management centers and establish a special housing fund account in an entrusted bank. Both PRC companies and their employees are
required to contribute to the housing funds.
We have not made adequate contributions to employee benefit plans, as required by applicable PRC laws and regulations. We have
recorded accruals for the estimated underpaid amounts for the current employees in our financial statements. However, we have not made
any accruals for the interest on underpayment and penalties that may be imposed by the relevant PRC government authorities. If we are
subject to investigations related to non-compliance with labor laws and are imposed severe penalties or incur significant legal fees in
connection with labor law disputes or investigations, our business, financial condition and results of operations may be adversely
affected.

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We rely principally on dividends and other distributions on equity paid by our subsidiaries to fund any cash and financing
requirements we may have, and any limitation on the ability of our subsidiaries to make payments to us could have a material adverse
effect on our ability to borrow money or pay dividends to holders of our ADSs.
As a holding company, we rely principally on dividends and other payments from our wholly owned operating subsidiaries in China
for our cash requirements, including funds necessary to service any debt we may incur, to pay dividends and other cash distributions to
our shareholders and to pay our operating expenses. If our subsidiaries or any their ability to pay dividends to us. In addition, our
subsidiaries are permitted to pay dividends to us only out of their accumulated profits, if any, as determined in accordance with PRC
accounting standards and regulations. Pursuant to laws applicable to entities incorporated in the PRC, each of our subsidiaries in the PRC
must make appropriations from after tax profit to a statutory surplus reserve fund. The reserve fund requires annual appropriation of 10%
of after tax profit (as determined under accounting principles generally accepted in the PRC at each year-end) after offsetting
accumulated losses from prior years, until such reserve reaches 50% of the subsidiary’s registered capital. The reserve fund can only be
used to increase the registered capital and eliminate further losses of the respective companies under PRC regulations. As of December
31, 2020, 2021 and 2022, total statutory reserves of our PRC subsidiaries were RMB70.0 million, RMB77.5 million and RMB78.3
million (US$11.4 million). These reserves are not distributable as cash dividends, loans or advances. In addition, due to restrictions under
PRC laws and regulations, our PRC subsidiaries are restricted in their ability to transfer their net assets to the company in the form of
dividend payments, loans or advances. Amounts of net assets restricted include paid up capital and statutory reserve funds of our PRC
subsidiaries amounted to RMB777.7 million, RMB936.8 million and RMB898.6 million (US$130.3 million) as of December 31, 2020,
2021 and 2022, respectively. As a result, our Chinese subsidiaries are restricted in their ability to transfer a portion of their net assets to
us or any of our other subsidiaries in the form of dividends, loans or advances. Limitation on the ability of our Chinese subsidiaries to
pay dividends to us or any of our other subsidiaries could materially and adversely limit our ability to borrow money outside of China or
pay dividends to holders of our ADSs. Also, see “— Risks Related to Doing Business in China — It is unclear whether we will be
considered as a PRC “resident enterprise” under the Enterprise Income Tax Law of the PRC, and depending on the determination of our
PRC “resident enterprise” status, dividends paid to us by our PRC subsidiaries may be subject to PRC withholding tax, we may be
subject to 25% PRC income tax on our worldwide income, and holders of our ADSs may be subject to PRC withholding tax on
dividends on, and gains realized on their transfer of, our ADSs.”
PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the
proceeds of our initial public offering to make loans or additional capital contributions to our PRC subsidiaries which would
materially and adversely affect our liquidity and our ability to fund and expand our business.
In utilizing the proceeds of our initial public offering of ADSs as an offshore holding company of our PRC subsidiaries, we may
make loans to our PRC subsidiaries, or we may make additional capital contributions to our PRC subsidiaries. Any loans or additional
capital contributions to our PRC subsidiaries are subject to PRC regulations and approvals. For example, loans by us to our subsidiaries
in China, which are foreign-invested enterprises, to finance their activities cannot exceed statutory limits and must be registered with the
SAFE or its local counterpart.
We may also decide to finance our subsidiaries by means of capital contributions. According to the relevant PRC regulations on
foreign-invested enterprises in China, depending on the total amount of investment, capital contributions to our PRC subsidiaries are no
longer subject to the approval of the PRC Ministry of Commerce or its local branches. Instead, we are required to file and submit
required information and documents online within 20 working days of such event. However, we cannot assure you that the regulations
will always remain favorable to us. If the regulations are revised in the future or we fail to complete such registration or obtain such
approvals on time, our ability to use the proceeds from our initial public offering of ADSs and to capitalize on our operations in the PRC
may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.

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Except for the filing required by PRC Ministry of Commerce or its local branches, when using the capital contributions to exchange
for RMB funds, the domestic institutions including foreign-invested enterprises, must comply with certain foreign exchange
requirements. For example, SAFE promulgated the Circular of the State Administration of Foreign Exchange on Reforming and
Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or Circular 16, on June 9, 2016. Under
Circular 16, the foreign exchange receipts under capital accounts of a domestic institution and the RMB funds obtained thereby from
foreign exchange settlements may be used for expenditure under current accounts within its business scope or expenditure under capital
accounts permitted by laws and regulations. However, they may not be used (i) directly or indirectly, for expenditure beyond the
enterprise’s business scope or expenditure prohibited by laws and regulations of the state; (ii) unless otherwise specified, directly or
indirectly, for investments in securities or other investments than banks’ principal-secured products; (iii) for the granting of loans to non-
affiliated enterprises, except where it is expressly permitted in the business license; and (iv) for the construction or purchase of real estate
for purposes other than self-use (except for real estate enterprises). In addition, the RMB funds obtained thereby from foreign exchange
settlements may not be used to repay RMB loans if the proceeds of such loans have not been fully used by the domestic institution,
including a foreign-invested company like us.
We cannot assure you that we will be able to obtain these government approvals on a timely basis, if at all, with respect to future
capital contributions by us to our subsidiaries. If we fail to receive such approvals, our ability to use the proceeds of our initial public
offering and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to
fund and expand our business.
It is unclear whether we will be considered as a PRC “resident enterprise” under the Enterprise Income Tax Law of the PRC, and
depending on the determination of our PRC “resident enterprise” status, dividends paid to us by our PRC subsidiaries may be subject
to PRC withholding tax, we may be subject to 25% PRC income tax on our worldwide income, and holders of our ADSs who are not
PRC residents may be subject to PRC withholding tax on dividends on, and gains realized on their transfer of, our ADSs.
Under the PRC Enterprise Income Tax Law and its Implementation Regulations, or the EIT Law, dividends, interest, rent, royalties
and gains on transfers of property payable by a foreign-invested enterprise in China to its foreign investor who is a non-resident
enterprise without any establishment or place of business within China or if the received dividends, interest, rent, royalties and gains
have no connection with the establishment or place of business of such foreign investor will be subject to a 10% withholding tax, unless
such non-resident enterprise’s jurisdiction of incorporation has a tax treaty with China that provides for a reduced rate of withholding tax.
Under the EIT Law, an enterprise established outside China with its “de facto management body” within China is considered a “resident
enterprise” in China and is subject to the Chinese enterprise income tax at the rate of 25% on its worldwide income. The “de facto
management body” is defined as the organizational body that effectively exercises overall management and control over production and
business operations, personnel, finance and accounting, and properties of the enterprise. There are no detailed rules or precedents
governing the procedures and specific criteria for determining “de facto management body.”
The Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises
on the Basis of De Facto Management Bodies, or Circular 82, provides certain specific criteria for determining whether the “de facto
management body” of a Chinese-controlled offshore-incorporated enterprise is located in China. According to Circular 82, a Chinese-
controlled offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a “de facto management body” in
China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following criteria are met: (i) the
primary location of the day-to-day operational management is in China; (ii) decisions relating to the enterprise’s financial and human
resource matters are made or are subject to approval by organizations or personnel in China; (iii) the enterprise’s primary assets,
accounting books and records, company seals, and board and shareholders meeting minutes are located or maintained in China; and
(iv) 50% or more of voting board members or senior executives habitually reside in China.

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Although substantially all of our operational management is based in the PRC, it is unclear whether PRC tax authorities would
require (or permit) us to be treated as a PRC resident enterprise. It is also unclear whether the dividends we receive from our PRC
subsidiaries will constitute dividends between “qualified resident enterprises” and therefore qualify for exemption from withholding tax
if we are deemed to be a “resident enterprise” for PRC enterprise income tax purposes. We are not controlled by a Chinese enterprise or
PRC enterprise group and as such we do not believe that our company meets all of the conditions to be deemed a PRC resident
enterprise. For the same reasons, we believe our other subsidiaries located outside China are not PRC resident enterprises. In addition,
we are not aware of any offshore holding companies with a corporate structure similar to ours ever having been deemed a PRC “resident
enterprise” by PRC tax authorities. However, the tax resident status of an enterprise is subject to determination by PRC tax authorities
and uncertainties remain with respect to the interpretation of the term “de facto management body.” While we do not currently consider
our company or any of our overseas subsidiaries to be a PRC resident enterprise, there is a risk that the PRC tax authorities may deem
our company as a PRC resident enterprise since a substantial majority of the members of our management team are located in China, in
which case we would be subject to the PRC enterprise income tax at the rate of 25% on our worldwide income.
If the PRC tax authorities determine that we are a resident enterprise for PRC enterprise income tax purposes, among other things,
we would be subject to the PRC enterprise income tax at the rate of 25% on our worldwide taxable income, substantially higher than the
10% withholding tax rate to which we are subject as a non-PRC resident enterprise. Furthermore, if we are treated as a PRC resident
enterprise, payments of dividends by us may be regarded as derived from sources within the PRC and therefore we may be obligated to
withhold PRC income tax at 10% on payments of dividends on the ADSs or shares to non-PRC resident enterprise investors. In the case
of non-PRC resident individual investors, the tax may be withheld at a rate of 20%. In addition, if we are treated as a PRC resident
enterprise, any gain realized on the transfer of the ADSs and/or shares by non-PRC resident investors may be regarded as derived from
sources within the PRC and accordingly may be subject to a 10% PRC income tax in the case of non-PRC resident enterprises or 20% in
the case of non-PRC resident individuals. The PRC tax on dividends and/or gains may be reduced or exempted under applicable tax
treaties between the PRC and the holder’s home country.
In addition, under the Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-
Resident Enterprises, or STA Public Notice 7, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by
non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not
have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. Gains
derived from such indirect transfer may be subject to PRC enterprise income tax. According to STA Public Notice 7, “PRC taxable
assets” include assets attributed to an establishment in China, immovable properties in China, and equity investments in PRC resident
enterprises. See “Item 4. Information on the Company — B. Business Overview — Regulatory Matters — Regulations Relating to Tax.”
As part of our restructuring, GreenTree Hospitality Group Ltd., or GreenTree Hospitality, the listing entity for the purpose of our initial
public offering, acquired through a share exchange the entire share capital of GreenTree Samoa, including the equity interests in most of
our PRC operating subsidiaries then held by it. See “Item 4. Information on the Company — C. Organizational Structure.” This
acquisition of equity interests in our PRC operating subsidiaries by GreenTree Hospitality may be deemed to be an indirect transfer of
PRC taxable assets, and the gains from the acquisition may be subject to PRC enterprise income tax at a rate of up to 25%. However,
there is uncertainty as to the implementation details of STA Public Notice 7. If STA Public Notice 7 was determined by the tax
authorities to be applicable to the abovementioned and other of our transactions involving PRC taxable assets, we might be required to
spend valuable resources to comply with STA Public Notice 7 or to establish that the relevant transactions should not be taxed under STA
Public Notice 7. If such transactions involving PRC taxable assets were subject to PRC enterprise income tax, our results of operations
and financial condition could be adversely affected.
If additional remedial measures are imposed on the “big four” PRC-based accounting firms, including our independent registered
public accounting firm, in administrative proceedings brought by the SEC alleging such firms’ failure to meet specific criteria set by
the SEC with respect to requests for the production of documents, we could be unable to timely file future financial statements in
compliance with the requirements of the Exchange Act.
Starting in 2011, the Chinese affiliates of the “big four” accounting firms, including our independent registered public accounting
firm, were affected by a conflict between U.S. and Chinese law. Specifically, for certain U.S. listed companies operating and audited in
mainland China, the SEC and the PCAOB sought to obtain from the Chinese accounting firms access to their audit work papers and
related documents. The firms were, however, advised and directed that under Chinese law they could not respond directly to the U.S.
regulators on those requests, and that requests by foreign regulators for access to such papers in China had to be channeled through the
CSRC.

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In late 2012, this impasse led the SEC to commence administrative proceedings under Rule 102(e) of its Rules of Practice and also
under the Sarbanes-Oxley Act of 2002 against the Chinese accounting firms, including our independent registered public accounting
firm. In January 2014, the administrative law judge reached an initial decision to impose penalties on the firms including a temporary
suspension of their right to practice before the SEC. The accounting firms filed a petition for review of the initial decision. On
February 6, 2015, before a review by the commissioners of the SEC had taken place, the firms reached a settlement with the SEC. Under
the settlement, the SEC accepts that future requests by the SEC for the production of documents will normally be made to the CSRC. The
firms will receive matching Section 106 requests, and are required to abide by a detailed set of procedures with respect to such requests,
which in substance require them to facilitate production via the CSRC. If they fail to meet specified criteria, the SEC retains authority to
impose a variety of additional remedial measures on the firms depending on the nature of the failure. Remedies for any future
noncompliance could include, as appropriate, an automatic six-month bar on a single firm’s performance of certain audit work,
commencement of a new proceeding against a firm, or in extreme cases the resumption of the current proceeding against all four firms.
The audit committee is aware of the policy restriction and communicated with our independent auditor to ensure compliance.
In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, listed companies in the United
States with major PRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which
could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act, including
possible delisting. Moreover, any negative news about any such future proceedings against these audit firms may cause investor
uncertainty regarding China-based, United States-listed companies and the market price of our ADSs may be adversely affected.
If our independent registered public accounting firm were denied, even temporarily, the ability to practice before the SEC and we
were unable to timely find another registered public accounting firm to audit and issue an opinion on our consolidated financial
statements, our consolidated financial statements could be determined not to be in compliance with the requirements of the Exchange
Act.
The audit report included in this annual report is prepared by an auditor which the U.S. Public Company Accounting Oversight
Board was unable to inspect and investigate completely before 2022 and, as such, our investors have been deprived of the benefits of
such inspections in the past, and may be deprived of the benefits of such inspections in the future.
Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report,
as an auditor of companies that are traded publicly in the U.S. and a firm registered with the U.S. Public Company Accounting Oversight
Board, or the PCAOB, is required by the laws of the U.S. to undergo regular inspections by the PCAOB to assess its compliance with the
laws of the U.S. and professional standards. According to Article 177 of the PRC Securities Law which became effective in March 2020,
no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the
PRC. Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual
may provide the documents and materials relating to securities business activities to overseas parties. In 2021, PCAOB made
determinations that the positions taken by PRC authorities prevented the PCAOB from inspecting and investigating firms headquartered
in mainland China and Hong Kong completely. On August 26, 2022, the PCAOB signed a Statement of Protocol with the China
Securities Regulatory Commission and the Ministry of Finance of the PRC, taking the first step toward opening access for the PCAOB to
inspect and investigate completely registered public accounting firms headquartered in mainland China and Hong Kong including our
auditor. According to its announcement, the PCAOB sent staff to conduct on-site inspections and investigations in Hong Kong from
September to November 2022 and conducted inspection field work and investigative testimony in a manner consistent with the PCAOB’s
methodology and approach to inspections and investigations in the U.S. and globally. The PCAOB inspections have preliminarily
identified numerous deficiencies in the audit firms in China, which are consistent with the types and number of findings the PCAOB has
encountered in other first-time inspections around the world, and the final inspection reports is expected to be completed and made
public in 2023. If audit firms in China had been subject to such inspections in the past, such deficiencies may have been identified earlier
and these audit firms, including our auditor, may have taken remedial measures to address any such deficiencies, and the historical
inability of the PCAOB to inspect audit firms in China has deprived our investors of the benefits of such inspections. Because our auditor
was not subject to such inspections before 2022, we cannot assure you that it will have sufficient time to fully address any deficiency that
may be identified as part of the inspection process to improve future audit quality. The inability of the PCAOB to conduct complete
inspections of auditors in China before 2022 may have made it more difficult to evaluate the effectiveness of our auditor’s audit
procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections, which could
cause investors or potential investors in our ADSs to lose confidence in the quality of our consolidated financial statements.

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In addition, while the PCAOB announced in December 2022 that it secured complete access to inspect and investigate registered
public accounting firms headquartered in China, we cannot assure you that the PCAOB will continue to have such access in the future. If
the PCAOB is not able to inspect and investigate completely auditors in China for any reason, such as any change in the position of the
governmental authorities in China in the future, our investors may be deprived of the benefits of such inspections again.
If the PCAOB determines that it is unable to inspect or investigate completely our auditor at any point in the future, our ADSs may be
prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, as amended, or the HFCA Act,
and any such trading prohibition on our ADSs or threat thereof may materially and adversely affect the price of our ADSs and value
of your investment.
The HFCA Act was signed into law on December 18, 2020 and amended pursuant to the Consolidated Appropriations Act, 2023 on
December 29, 2022. Under the HFCA Act and the rules issued by the SEC and the PCAOB thereunder, if we have retained a registered
public accounting firm to issue an audit report where the registered public accounting firm has a branch or office that is located in a
foreign jurisdiction and the PCAOB has determined that it is unable to inspect or investigate completely because of a position taken by
an authority in the foreign jurisdiction, the SEC will identify us as a “covered issuer”, or SEC-identified issuer, shortly after we file with
the SEC a report required under the Securities Exchange Act of 1934, or the Exchange Act (such as our annual report on Form 20-F) that
includes an audit report issued by such accounting firm; and if we were to be identified as an SEC-identified issuer for two consecutive
years, the SEC would prohibit our securities (including our shares or ADSs) from being traded on a national securities exchange or in the
over-the-counter trading market in the United States.
In December 2021, the PCAOB made its determinations, or the 2021 determinations, pursuant to the HFCA Act that it was unable to
inspect or investigate completely registered public accounting firms headquartered in mainland China or Hong Kong including our
auditor, Ernst & Young Hua Ming LLP. After we filed our annual report on Form 20-F for the fiscal year ended December 31, 2021 that
included an audit report issued by Ernst & Young Hua Ming LLP on May 17, 2022, the SEC conclusively identified us as an SEC-
identified issuer on June 14, 2022. As such, we are required to satisfy additional disclosure requirement for SEC-identified issuers that
are also foreign issuers in this annual report. See “Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.”
Following the Statement of Protocol signed between the PCAOB and the China Securities Regulatory Commission and the Ministry
of Finance of the PRC in August 2022 and the on-site inspections and investigations conducted by the PCAOB staff in Hong Kong from
September to November 2022, the PCAOB Board voted in December 2022 to vacate the previous 2021 determinations, and as a result,
our auditor, Ernst & Young Hua Ming LLP, is no longer a registered public accounting firm that the PCAOB is unable to inspect or
investigate completely as of the date of this annual report or at the time of issuance of the audit report included herein. As such, we do
not expect to be identified as an SEC-identified issuer again in 2023. However, the PCAOB may change its determinations under the
HFCA Act at any point in the future. In particular, if the PCAOB finds its ability to completely inspect and investigate registered public
accounting firms headquartered in mainland China or Hong Kong is obstructed by the PRC authorities in any way in the future, the
PCAOB may act immediately to consider the need to issue new determinations consistent with the HFCA Act. We cannot assure you that
the PCAOB will always have complete access to inspect and investigate our auditor, or that we will not be identified as an SEC-
identified issuer again in the future.
If we are identified as an SEC-identified issuer again in the future, we cannot assure you that we will be able to change our auditor
or take other remedial measures in a timely manner, and if we were to be identified as an SEC-identified issuer for two consecutive years,
we would be delisted from the NYSE and our securities (including our shares and ADSs) will not be permitted for trading “over-the-
counter” either. If our securities are prohibited from trading in the United States, there is no certainty that we will be able to list on a non-
U.S. exchange or that a market for our shares will develop outside of the United States. Such a prohibition or any threat thereof would
substantially impair your ability to sell or purchase our ADSs when you wish to do so, and the risk and uncertainty associated with
delisting would have a negative impact on the price of our ADSs. Also, such a prohibition or any threat thereof would significantly affect
our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial
condition, and prospects. Moreover, the implementation of the HFCA Act and other efforts to increase the U.S. regulatory access to audit
information could cause investor uncertainty as to China-based issuers’ ability to maintain their listings on the U.S. national securities
exchanges and the market price of the securities of China-based issuers, including us, could be adversely affected.

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Risks Related to Our Business
Our results of operations are subject to conditions typically affecting the hospitality industry.
Our results of operations are subject to conditions typically affecting the hospitality industry, including the following:
●
changes in national, regional or local economic conditions;
●
natural disasters or travelers’ fears of exposure to serious contagious diseases;
●
changes in travel patterns;
●
changes in governmental regulations that influence or determine wages, prices or construction costs;
●
local market conditions such as an oversupply of, or a reduction in demand for, hotel rooms;
●
our ability to secure desirable locations for our hotels;
●
the attractiveness of our hotels to potential guests and competition from other hotels;
●
changes in occupancy and room rates;
●
increases in operating costs and expenses due to inflation and other factors;
●
our ability to develop and maintain positive relations with current and potential franchisees; and
●
the performance of managerial and other employees of our hotels.
Changes in any of these conditions could adversely affect our occupancy rates, average daily rates and RevPAR or otherwise
adversely affect our business, results of operations and financial condition.
We are subject to various operational risks inherent in the franchised-and-managed business model.
Our success could be adversely affected by the performance of our franchised-and-managed hotels. As of December 31, 2022, we
franchised-and-managed approximately 98.5% of our hotels, and we derived 72.9%, 64.2% and 62.2% of our revenues from those hotels
in 2020, 2021 and 2022, respectively, which include revenues from membership fees of franchised-and-managed hotels. We plan to
increase the number of franchised-and-managed hotels in operation to increase our national presence in China. Our franchisees may not
be able to develop or construct hotel properties on a timely basis, which could adversely affect our growth strategy and may impact our
ability to collect fees from them on a timely basis. If our franchisees reduce their investments in the hospitality industry, develop or
construct fewer hotel properties, or abandon such development or construction altogether, our business, results of operations and
financial condition may be materially and adversely affected.
We oversee and manage the operations of our franchised-and-managed hotels pursuant to various franchise agreements. However,
we are not able to control the actions of our franchisees. Under those franchise agreements, our franchisees are typically responsible for
developing hotel properties on a timely basis, bearing the costs and expenses of developing and operating the hotels, including costs of
constructing, decorating or renovating the hotels to our standards and recruiting and employing hotel staff. However, if our franchisees
have difficulties in accessing capital or are reluctant to make investments for the construction, decoration, management or renovation of
the hotels, we may not be able to force them to secure the required capital and the quality of our franchised-and-managed hotels’
operations may be thereby diminished.

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We normally require our franchisees to secure relevant governmental approvals and permits for operating the hotels in our standard
franchise agreements and require that our franchisees provide us with some basic approvals and permits, including business licenses,
special industry licenses and fire prevention safety inspection certificates. However, some of our franchisees may not be able to obtain
such approvals or permits in a timely manner, or at all. See “— Failure to comply with government regulations relating to the franchise,
hospitality industry, construction, fire prevention, food hygiene, safety and environmental protection could materially and adversely
affect our business and results of operations.”
As many factors affecting the operations of those hotels are beyond our control, we cannot assure you that the quality of the services
in our franchised-and-managed hotels are consistent with our standards and requirements. Although we send for routine inspection
purposes regional managers and members of our quality control team to franchised-and-managed hotels on a regular basis, we may not
be able to identify problems in their operations and make responses on a timely basis. As a result, our image and reputation may suffer,
which may have a material adverse effect on our business and results of operations.
In addition to quality standards, safety incidents such as fire accidents may occur at our franchised-and-managed hotels despite our
supervision or entrusted management. Any such occurrence may result in substantial reputational harm to us and our brands. In addition,
if such safety incidents occur at any of the franchised-and-managed hotels that do not possess the relevant licenses, permits or inspection
certificates, there could be substantial negative publicity, thereby triggering large-scale government actions that could impact our entire
hotel network, which in turn will have a material adverse impact on our business, results of operations and financial condition.
Although our proprietary information system can collect operational and financial data of each hotel, we may not be able to avoid
fraud or manipulation of such data by some franchisees, which may adversely affect the ability to effectively respond to potential issues.
In addition, many of our franchisees do not own the hotel land or the property but typically lease the property from landlords who are
either a property owner or a sub-lessor. We cannot assure you that all landlords who lease the hotel property to our franchisees have good
and marketable title, or have unencumbered rights to lease or sub-lease the property to our franchisees. If any third party such as the
ultimate property owners or relevant governmental authorities successfully challenge the lease of our franchisees, or if our franchisees
fail to renew the leases when they expire, or if the landlords early terminate the lease, or if the properties or lands owned or leased by our
franchisees are demolished, acquired or otherwise reclaimed by the government, our franchisees may have to close their hotels and thus
terminate the franchise agreements and as a result, our business and results of operations may be adversely affected. Moreover, the term
of the leases for some of the property of our franchisees is shorter than the typical term of our franchise agreements. We cannot assure
you that upon expiration, these franchisees will be able to renew their leases in order to perform their franchise agreements with us.
We may not be able to renew our existing franchise agreements or renegotiate new franchise agreements when they expire.
We franchise hotels to third parties pursuant to franchise agreements. These franchise agreements may be renegotiated or may
expire. The versions of franchise agreements we have used during recent years typically have an initial term of 10 to 20 years except for
the franchise agreements with our Shell franchisees. We plan to renew our existing franchise agreements upon expiration or renegotiate
with our franchisees for new franchise agreements. However, we may be unable to retain our franchisees on satisfactory terms, or at all.
If a significant number of our existing franchise agreements expire and new franchisees do not cover those expired franchises, our
revenue and profit may decrease in the future, and our results of operations could be materially and adversely affected.
As the hospitality industry in China is highly competitive, the terms of our franchise agreements are influenced by contract terms
offered by our competitors. We cannot assure you that the terms of franchise agreements for new franchised-and-managed hotels entered
into or renewed in the future will be as favorable as the terms under our existing franchise agreements. If such agreements cannot be
renewed on satisfactory terms upon expiration, our results of operations could be materially and adversely affected.

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Failure to comply with government regulations relating to the leased-and-operated and franchised-and-managed business models,
hospitality industry, construction, fire prevention, food hygiene, safety and environmental protection could materially and adversely
affect our business and results of operations.
Our business is subject to various compliance and operational requirements under PRC laws and regulations, which include public
safety, construction, fire prevention, public area hygiene, health and sanitation and environmental protection, as well as requirements
related to construction or decoration of hotel premises. The failure of any of our hotels to comply with applicable laws and regulations
may incur substantial fines and penalties from the relevant PRC government authorities. Each hotel in our network must hold a basic
business license and a special industry license issued by local government authorities and must conduct its hotel operations within the
business scope of its business license. These hotels must also obtain various other licenses and permits. For example, if our hotels
provide catering service, they are required to obtain a food operation permit. In addition, any project construction undertaken by our
hotels may be subject to governmental approvals or filings requirements, and our failure to comply with the aforementioned requirements
may subject us to fines or the suspension or even the cessation of operations, which could materially and adversely affect our business,
financial condition and results of operations. In any event, we may not be able to obtain all permits, licenses, certificates and other
approvals required by government regulations, which could negatively impact our business and significantly harm our reputation.
As of December 31, 2022, we operate 61 leased-and-operated hotels. Out of our 61 leased-and-operated hotels, 11 have not obtained
fire prevention safety inspection certificates, nine have not obtained public area hygiene permits, 12 have not obtained special industry
permits, six which engage in catering business have not obtained the food operation permits, and two are in the process of applying for
food operation permits. Three of our leased and operated hotels share and operate on the same premises as our other leased and operated
hotels; these three leased and operated hotels have not obtained, and are unlikely to be able obtain their own licenses. Given the
significant discretion local government authorities have in the examination of our application as well as other factors beyond our control
in certain areas, we may be unable to obtain our food operation permits at all.
In addition, we have only been provided with and reviewed the relevant governmental approvals and permits for the operation of
3,315 out of our 3,998 franchised-and-managed hotels in total in operation as of December 31, 2022, and have found that:
●
approximately 0.51% of these hotels did not provide us with the business license;
●
approximately 4.43% of these hotels did not provide us with the special industry license;
●
Approximately 6.64% of these hotels did not provide us with the fire prevention safety inspection certificate; and
●
approximately 10.89% of these hotels did not provide us with the public hygiene license.
For our leased-and-operated hotels that have not obtained the necessary licenses, and to the extent that the franchisees who did not
provide us with the licenses had not obtained the licenses prior to the commencement of their operations, the legal consequences will be
as follows:
●
Business license: (i) orders by the registration authority to take corrective action, with the illegal income confiscated; (ii) if
market entity refuses to take corrective action, it shall be fined not less than RMB10,000 nor more than RMB100,000, or (iii) if
the circumstances are serious, be ordered to suspend or cease continuing operations, and be fined not less than RMB100,000
nor more than RMB 500,000.;
●
Special industry license: warnings or fines of up to RMB1,000 and even up to a 15-days detention. In addition, pursuant to
various local regulations, hotels failing to obtain the special industry license may be subject to warnings, orders to suspend or
cease continuing business operations, confiscations of illegal gains or fines (for instance, the fines could reach RMB200,000 in
Jiangsu if the circumstances are serious);
●
Fire prevention safety inspection certificate: (i) suspension of construction of projects, and/or use or operation of the business;
and (ii) fines between RMB30,000 and RMB300,000;

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●
Public hygiene license: a range of administrative penalties depending on the seriousness of a hotel’s activities: (i) warnings;
(ii) fines between RMB500 and RMB30,000; or (iii) suspension of operations for rectification, or revocation of public hygiene
license; and
●
Food operation permit: (i) confiscation of illegal gains, food illegally produced for sale and tools, facilities and raw materials
used for illegal production; or (ii) fines between RMB50,000 and RMB100,000 if the value of food illegally produced is less
than RMB10,000 or fines of 10 to 20 times of the value of food if such value is equal to or greater than RMB10,000.
If any franchisee is subject to the foregoing legal consequences, whether fines or orders to suspend or even cease operations, due to
its failure to obtain necessary licenses and permits or to comply with other requirements, our image and reputation may suffer, and such
franchisee may defer making or refuse to make payments in breach of its franchise agreement with us. As we hold equity interests in
certain of our franchisees, any regulatory non-compliance by such franchisees may also decrease the value of our investments. In either
case, our business and results of operations may be adversely affected. Furthermore, as to certain hotels that are being converted from the
leased-and-operated model to the franchised-and-managed model, if any franchisee refuses to return and uses any of our hotels’ permits
in breach of their supplementary agreements with us, our company as the registered permit holder could be held liable for any regulatory
non-compliance by our franchisees. See “— Our hotels being converted into franchised-and-managed hotels may not be able to obtain
their own operational licenses or fail to pay us the rent materially and adversely affect our business and results of operations.”
In respect of our franchising business, we are subject to a comprehensive disclosure requirement when recruiting and managing our
franchisees. In the past, we have not received penalties in relation to such requirements. However, our communication with our
franchisees could be found in violation of these requirements in the future. In the past, we have not received penalties in relation to such
requirements.
We may terminate franchise agreements earlier under certain circumstances, and we may have disputes with our franchisees which
may materially and adversely affect our business and result of operations.
Our franchisees may terminate our franchise agreements in the event that, among others, the franchised-and-managed hotels’
performance is worse than they expect. Although they are not permitted to do so by our franchise agreements, the franchisees may still
attempt to unilaterally terminate their franchise agreements. In such instances, we may have disputes with them, and it will be difficult
for us to force them to continue the performance of our franchise agreements until they expire. If the franchise agreements are eventually
terminated either based on a settlement between us and the franchisees or with a judgment or arbitral award which requires the
franchisees to compensate us for our losses and costs, such compensation may not cover our losses which we have suffered as a result of
the early termination, and we may no longer receive the franchise fees and related management fees from the termination. Furthermore,
if our franchisees breach or terminate their franchise agreements with us before the hotel commences operation, we might not be able to
grow our hotel network as planned.
Due to our rapid expansion in recent years, we have added a large number of new franchised-and-managed hotels into our hotel
network, some of which may not be able to provide consistent and high-quality service to meet our standards. To avoid potential damage
to our brand name and to ensure the quality of services provided to our guests, we may terminate our franchise agreements with such
franchisees. In addition, if any of our franchisees defaults or commits wrongdoing and fails to cure defaults or wrongdoings, we may also
need to terminate our franchise agreements. Although our franchise agreements typically allow us to terminate the agreements under
many circumstances, our franchisees may dispute our termination or our claim and in such cases we have to submit such disputes for the
settlement by courts or arbitration. For example, as of December 31, 2022 we had 15 pending legal proceedings with the franchised-and-
managed hotels. Also, we have in the past closed and may close in the future certain franchised-and-managed hotels as a result of
disputes with the franchisees for their failure to comply with our requirements on, among other things, the punctual payment of our
franchise fees or management fees, the decoration or operation standard, use of our brand, maintenance of the hotel condition and
appearance, the avoidance of competition between the franchisees, including keeping appropriate distances between the franchised-and-
managed hotels. For example, for the year ended December 31, 2022, we terminated 93 franchised-and-managed hotels that did not
comply with our brand and operating standards, respectively. If a significant number of our existing franchise agreements are terminated
early, our revenue and profit may decrease in the future.

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In case of a dispute with our franchisees, even if such disputes can be resolved in favor of us, the disputes could divert our
management attention, affect our brand image, and incur cost for us. There could also be situations where the franchisee is not in a
position to sufficiently compensate us for losses which we have suffered as a result of their defaults or wrongdoings. If we eventually
terminate any franchisees, we will lose such franchisees and can no longer collect franchise fees and management fees from them. If new
franchisees do not cover those terminated franchises, our results of operations and financial conditions could be materially and adversely
affected.
Our hotels being converted into franchised-and-managed hotels may not be able to obtain their own operational licenses or fail to pay
us the rent materially and adversely affect our business and results of operations.
During the past few years, we have sought to convert some hotels from the leased-and-operated model over to the franchised-and-
managed model through selling relevant business assets and handed over the management of such hotels, in most of the cases pursuant to
an asset, business and personnel transfer agreement, or Transfer Agreements, to certain individuals or entities that have subsequently
entered into franchise agreements with us and have therefore become our new franchisees. According to the Transfer Agreements, such
new franchisees shall take over and operate such hotels on their own account and shall take the risks and enjoy the benefit of operating
such hotels from the completion of the transfer contemplated by such agreements. However, the Transfer Agreements typically allow our
franchisees under such arrangements to continue to use the hotel’s permits that were previously obtained by us and remain in the name of
our company for a transitional period. As of December 31, 2022, one of the abovementioned new franchisees were still using our
relevant hotels’ permits. All of these franchisees have executed a supplementary agreement which requires them to stop using and return
to us our hotels’ permits upon execution of the supplementary agreements. Such supplementary agreements also require the franchisees
to indemnify us against all losses, costs or liabilities incurred by us for their defaults under such agreements. However, if any franchisees
refuse to return and continue to use any of our hotels’ permits, our company could be held liable as the registered permit holder for any
regulatory non-compliance on the part of our franchisees. As a result, any breach by our franchisees of relevant regulations could cause
us to incur relevant legal liability under PRC law, which may materially affect our brand image and our results of operations. In addition,
in such instances, because the relevant leases have not been transferred to our new franchisees, we continue to be the tenants of the
relevant hotel premises and we remain liable to pay the rent to our landlords, and may not thereafter be fully compensated by the new
franchisees. As a result, our result of operations and financial conditions may be materially and adversely affected by the default of such
franchisees. Furthermore, such arrangement between us and the new franchisees could be deemed as a sublease, and our landlords may
claim that our subleasing arrangement without our landlords’ consent constitutes a default. In such cases, we may be required by our
landlords to terminate sublease arrangements and compensate their losses, if any, which may further increase our costs and risks.
Moreover, we may not be able to enforce our rights against the franchisees under the supplementary agreements, which would hinder our
ability to prevent the franchisees from using our hotel permits and negatively impact our business and our reputation.
Our leased-and-operated hotels are subject to a number of operational risks.
For hotels under the leased-and-operated model, a significant portion of operating costs, including rent, is fixed. Accordingly, a
decrease in revenues could result in a disproportionately larger decrease in earnings because the operating costs and expenses are
unlikely to decrease proportionately. For example, the period during both the New Year and Chinese Spring Festival holidays generally
accounts for a smaller portion of our annual revenues than the other periods, but the expenses do not vary in proportion to changes in
occupancy rates and revenues. Major construction work near our hotel may also have a negative impact on the occupancy rate. We need
to continue to pay rent and salaries, make regular repairs, perform maintenance and renovations and invest in other capital improvements
for our leased-and-operated hotels throughout the year to maintain their attractiveness. Therefore, our leased-and-operated hotels’ costs
and expenses may remain constant or increase even if their revenues decline. The operation of each leased-and-operated hotel goes
through the stages of development, ramp-up and mature operation. Our involvement in the development of such properties presents a
number of risks, including construction delays or cost overruns, which may result in increased project costs or forgone revenue. During
the development stage, significant pre-opening expenses will be incurred, and at the ramp-up stage, which is usually six months, when
the occupancy rate increases gradually, revenues generated by these hotels may be insufficient to cover their operating costs, which are
relatively fixed in nature. As a result, most newly opened leased-and-operated hotels may not achieve profitability until they reach
mature operations. We also may be unable to recover development costs we incur for projects that are not completed. Any expansion of
our leased-and-operated hotel portfolio would incur significant pre-opening expenses during the development stage and relatively low
revenues during the ramp-up stage of such newly opened leased-and-operated hotels, of which expenses may have a significant negative
impact on our results of operations. Properties that we develop could become less attractive due to market saturation, oversupply or
changes in market demand, with the result that we may not be able to recover development costs as we expect, or at all.

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We also may acquire or develop owned-and-operated hotels on a limited, case-by-case basis to seize unusually attractive business
opportunities. Any such owned-and-operated hotels will be subject to risks similar to those of our leased-and-operated hotels. Such
owned-and-operated hotels will also be subject to depreciation in the value paid by us for the underlying hotel property, which usually is
influenced by macroeconomic and local political and economic factors.
In certain circumstances, we have needed to liquidate certain of our PRC subsidiaries and branches which previously operated
leased-and-operated hotels, upon the completion of conversion or closure of hotels. In liquidating such subsidiaries and branches, we
need to complete various deregistration procedures, which may be time-consuming and therefore we cannot assure you that such
subsidiaries and branches can be deregistered in a timely manner. In the future, we may need to liquidate more subsidiaries and branches
which have ceased to operate leased-and-operated hotels.
The legal rights of our franchisees and us to use certain leased properties could be challenged by property owners or other third
parties, which could prevent our franchisees or us from operating the affected hotels or increase the costs associated with operating
these hotels.
For most of our franchised-and-managed hotels and all but four of our leased-and-operated hotels, we and our franchisees do not
hold property ownership with respect to the premises under which those hotels are operated. Instead, we and our franchisees rely on
leases or contracted management arrangements with third parties who either own the properties or lease the properties from the ultimate
property owner. As of December 31, 2022, 26 of the ultimate owners of the properties of our leased-and-operated hotels failed to provide
us with the relevant title certificates. As to these 26 ultimate owners, if they have not obtained and provided such title certificates because
the relevant properties were constructed by such ultimate owners without having obtained or in violation of a construction project
planning permit, our of such properties may be challenged or even invalidated by a government authority or relevant dispute resolution
institution. Meanwhile, the property title certificates for the premises on which approximately half of our leased-and-managed hotels are
located have a different designated use from the actual usage of those properties, and our lease of such properties may be challenged by
relevant government authorities and subject us to cessation of operations or fines in an amount of up to RMB30,000 for each property or
approximately RMB480,000 in aggregate. If the property owners’ title and the legal rights of our franchisees and us to the leases of such
properties are successfully challenged by a government authority or dispute resolution institution as mentioned above, the development
or operations of our hotels on such properties could be adversely affected.
In addition, we and our franchisees are subject to the risks of potential disputes with property owners or our immediate lessors and to
forced closure of hotels by the government. Such disputes and forced closures, whether resolved in the favor of our franchisees and us,
may divert management attention of our franchisees and us, harm our reputation or otherwise disrupt and adversely affect our business.
Where immediate lessors are not the ultimate owners of hotel properties operated by our franchisees and us, in some instances, no
consent was obtained from the owners to sublease the hotel properties to our franchisees or us. A property owner’s failure to duly obtain
the title to the property or a sub-lessor’s failure to receive any necessary approvals from the ultimate owner or the primary leaseholder, as
applicable, could potentially invalidate the underlying lease or result in the renegotiation of such lease which may lead to less favorable
terms. Some of the properties we or our franchisees lease from third parties were subject to mortgages at the time the leases were signed.
In such circumstances and where consent to the lease was not obtained from the mortgage holder, the lease may not be binding on the
transferee of the property if the mortgage holders foreclose on the mortgage and transfer the property, which could in turn materially and
adversely affect the ability of our franchisees and us to operate the hotel facility located on such property. In the past, although our
operations have not been disrupted simply due to the lack of title certificates or consent from the owners, such events could occur in the
future.
We also sublease the property parts we do not use to third parties and in some instances where we have closed or converted our
leased-and-operated hotels, we may also need to sublease the whole properties we leased for such hotels to third parties to save costs if
our landlords do not agree to early terminate our lease. In some instances, no written consent was obtained from our landlords to sublease
such property parts or the whole property to third parties. Our failure to receive any necessary approvals from our landlords could
potentially invalidate the underlying lease or result in our default under such subleases, which may in turn affect our business. In
addition, if our sub-lessees are not able to pay us rent in a timely manner or at all, we are obligated to pay the rent to our landlords on our
own account. If we fail to pay such rent, we may be required by our landlords to terminate the sublease arrangements and compensate
their losses, if any, which may adversely affect our result of operations and our financial condition.

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If we are unable to compete successfully, our business, financial condition and results of operations may be harmed.
The hospitality industry in China is highly competitive. Competition in the industry is primarily based on convenience of location,
geographic coverage, service quality, room rates, quality of accommodation, brand name recognition, range of services and guest
amenities. We compete primarily with branded and standalone hotels as well as regional and local mid-scale hotels. We also compete
with four- and five- star hotels, as we offer rooms with standards comparable to many of those hotels while maintaining competitive
pricing. Furthermore, we compete with other hotels for guests in each market segment in which we operate, as our typical business and
leisure traveler guests may change their travel, spending and consumption patterns and choose to stay in hotels in different markets. New
and existing competitors may offer competitive rates, greater convenience, services or amenities or superior facilities, which could attract
guests away from our hotels, resulting in a decrease in occupancy and average daily rates for our hotels. In addition, competition among
franchised hotels is intense in attracting potential franchisees and retaining existing franchisees. We believe that hotel operators choose
hospitality franchisors based on primarily the value and quality of a franchisor’s brand, reputation and service and the extent to which
affiliation with that franchisor may increase the franchisee’s hotel occupancy rates and profitability. Any of these factors may have an
adverse effect on our competitive position, results of operations and financial condition.
We may not be able to successfully attract new franchisees and compete for franchise agreements and, as a result, we may not be able
to achieve our planned growth.
Our growth strategy includes expanding through franchised-and-managed hotels by entering into franchise agreements with our
franchisees. We believe that our ability to attract new franchisees and compete for franchise agreements with them depends primarily on
our brand recognition and reputation, the results of our overall operations in general and the success of our current franchised-and-
managed hotels. Other competitive factors for franchise agreements include marketing support, membership program, efficiency of our
central reservation system, our ability to provide systems and support to assist franchisees to operate their hotels cost-effectively. The
terms of any new franchise agreements that we obtain also depend on the terms that our competitors offer for those agreements. In
addition, if the availability of suitable locations for new properties decreases, or governmental planning or other local regulations change,
the supply of suitable properties for additional franchised-and-managed hotels could diminish. If the performance of our franchised-and-
managed hotels is less successful than that of our competitors’ hotels or if we are unable to offer terms as favorable as those offered by
our competitors, we may not be able to compete effectively for new franchise agreements and we may not be able to attract as many new
franchisees as we expect. As a result, we may not be able to achieve our planned growth and our business and results of operations may
be materially and adversely affected.
The leases of our franchisees and us could be terminated early, we and our franchisees may not be able to renew the existing leases
on commercially reasonable terms and the rents paid by us or our franchisees could increase substantially, which could materially
and adversely affect our operations.
The terms of leases for our franchised-and-managed hotels and leased-and-operated hotels typically provide, among other things,
that the lease could be terminated under certain legal or factual conditions. If any such lease were terminated early, operations of the
related hotel property may be interrupted or discontinued and costs may be incurred by us or our franchisees to relocate to another
location. Furthermore, we may be liable to our lessors, guests, franchisees and other vendors and may be required to pay losses and
damages due to our default under relevant contracts. As a result, our business, results of operations and financial condition could be
materially and adversely affected.
Although we intend to coordinate with our franchisees to renew existing leases of our franchised-and-managed hotels, and to renew
existing leases of certain of our leased-and-operated hotels, there can be no assurance that we and our franchisees will be able to renew
such leases and maintain current hotel operations on satisfactory terms, or at all. In particular, we and our franchisees may experience
increased rent payments and increased operating cost in connection with renegotiating leases. If we and our franchisees fail to maintain
current hotel operations on satisfactory terms upon expiration of the leases, the respective operating costs of our company and our
franchisees may increase, the ability of our franchisees to pay their franchise fees may decline, and overall profits generated from hotel
operations may decrease. If we and our franchisees are unable to pass on increased costs to our guests through room rate increases, the
operating margins and earnings of our company and our franchisees could decrease and our results of operations could be materially and
adversely affected.

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We may terminate our leases early for certain reasons and any failure by us to terminate a lease for cause may subject us to payment
of liquidated damages.
Our leases typically allow us to terminate the lease early under limited circumstances, and in some instances, our leases contain a
term which requires us to pay the contingent rent for our wrongful early termination of such agreements. In the past, we have early
terminated some leases of hotel properties and closed our leased-and-operated hotels underlying such leased properties, and disputes
arose between us and our landlords whereby we were demanded to pay the contingent rents and liquidated damages. If such disputes
occur in the future, and are resolved in favor of our landlords, we may need to pay losses and damages to the landlords and as a result,
our business, results of operations and financial condition could be materially and adversely affected.
Our growth depends on our ability to increase revenues generated by our existing hotels.
While sales growth will depend in part on our plans for new hotel openings, deeper penetration into existing and new geographic
markets and increased sales at our existing hotels will also affect our sales growth and will continue to be critical factors affecting our
revenue and profit. Our ability to increase the revenues generated by our hotels depends in part on our ability to successfully implement
our growth strategy and related initiatives. Our ability to penetrate further into the existing geographic markets where we already have a
presence depends in part on our ability to successfully market ourselves and to maintain and increase sales to our existing members,
including individual members and corporate members and attract more members to our membership program. We may not be able to
achieve our targeted sales growth at our existing hotels, and sales at existing hotels could decrease. In addition, we may not be able to
achieve our targeted level of expansion within existing and new geographic markets. The occurrence of any of such events may have a
material adverse effect on our business, financial condition and results of operations.
Our growth depends on our ability to grow the number of hotels in operation.
Our growth depends on our ability to open and profitably operate new hotels under both franchised-and-managed model and leased-
and-operated model. In 2020, 2021 and 2022, we opened 528, 693 and 287 new franchised-and-managed hotels, respectively. In 2020,
2021 and 2022, we opened ten, 29 and eight new leased-and-operated hotels, respectively. We plan to increase the number of our hotels
in the future. We may not be successful in identifying and leasing or franchising additional hotel properties at desirable locations and on
commercially reasonable terms or at all. In more developed cities, it may be difficult to increase the number of hotels because we or our
competitors may already have operations in such cities. In less developed cities, demand for our hotels may not increase as rapidly as we
expect. We also may incur substantial costs in connection with evaluating hotel properties and negotiating with property owners,
including ones that we are subsequently unable to lease or franchise.
The growth in the number of hotels is subject to numerous risks, many of which are beyond our control. Among other risks, the
following factors affect our ability to open and operate additional hotels profitably and achieve growth in the number of our hotels:
●
the availability and cost of suitable hotel locations;
●
the availability and cost of capital to fund construction or conversion;
●
cost-effective and timely construction of hotels (which construction can be delayed due to, among other reasons, labor and
materials availability, labor disputes, local zoning and licensing matters, and weather conditions);
●
the ability of our company and our franchisees to secure required governmental permits;
●
the availability of qualified hotel management staff and other personnel;
●
our ability to enhance our reservation, operational and service delivery systems to support additional franchisees in a timely and
cost-effective manner;
●
our ability to effectively and efficiently implement our development plan;

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●
our ability to introduce our brands into new markets, any failure of which may adversely impact potential property owners’ or
franchisees’ acceptance of and confidence in us; and
●
our ability to attract new qualified franchisees and to retain existing franchisees.
We may not be able to manage our expected growth, which could adversely affect our results of operations.
We have experienced substantial growth since our inception. We have increased the number of our total hotels in operation in China
from eight as of December 31, 2005 to 4,059 as of December 31, 2022, and we intend to focus on developing additional franchised-and-
managed hotels in different geographic locations in China and internationally, as well as growing through mergers, acquisitions and
strategic alliances. This expansion has placed, and will continue to place, substantial demands on our managerial, operational,
technological, financial and other resources. There can be no assurance that we will be able to effectively manage our growth. If our
growth initiatives fail, and if we fail to integrate new alliances, merged entities or acquired targets into our network, our businesses and
prospects may be materially and adversely affected.
Our planned expansion will also require us to maintain the consistency of our brands and the quality of our services to ensure that
our brands do not suffer as a result of any deviations, whether actual or perceived. In order to manage and support our growth, we must
improve our existing operational, administrative and technological systems and our financial and management controls, and recruit, train
and retain qualified hotel managerial personnel as well as other administrative and sales and marketing personnel, particularly as we
expand into new markets.
We cannot assure you that we will be able to effectively and efficiently manage the growth of our operations, recruit and retain
qualified personnel and integrate new franchised-and-managed hotels into our operations, whether they are organically developed or
strategically acquired. Any failure to effectively and efficiently manage our expansion may materially and adversely affect our ability to
capitalize on new business opportunities, which in turn may have a material adverse effect on our business, financial condition and
results of operations.
Acquisitions, financial investment or strategic investment may have an adverse effect on our ability to manage our business and harm
our results of operations and financial condition.
If we are presented with appropriate opportunities, we may acquire or invest in businesses or assets. For example, in 2018, we
acquired the majority of the equity interests in several hotel operating entities. In 2019, we acquired several properties for strategic
development purpose. In 2020, we acquired all the hotel assets from a hotel management company located in Guangxi, and thereafter
opened one leased-and-operated hotel under “GreenTree Eastern” brand. In 2021, we have acquired some hotels in some cities where we
had limited number of leased and operated hotels or we did not have any leased and operated hotels. In 2022, we opened eight leased and
operated hotels, all located near transportation hubs, central business districts, or government centers in Shanghai, Chongqing,
Hangzhou, Taiyuan, Haikou and Karamay.
The existing and future acquisitions or investments may expose us to potential risks, including risks associated with unforeseen or
hidden liabilities, risks that acquired or invested companies will not achieve anticipated performance levels, diversion of management
attention and resources from our existing business, difficulty in integrating the acquired businesses with our existing operational
infrastructure, and inability to generate sufficient revenues to offset the costs and expenses of acquisitions or investments. For example,
in January 2019, we became a major shareholder of Argyle via an acquisition transaction. The sellers, including Argyle Hotel
Management Group (Australia) Pty Ltd and its founder, Mr. Kevin Zhang, failed to achieve the performance targets committed by them
and since the middle of 2022 we have been in dispute with the sellers as to fulfillment of the committed performance targets and/or
compliance with local laws and regulations. Such disputes have diverted the attention of our management, caused us to incur expenses
and will further cause losses to us. In addition, in March 2021, we entered into a letter of intent with Shanghai Hongyuan Shengshi
Investment Development Co., Ltd, or Hongyuan Shengshi, to purchase two properties from Hongyuan Shengshi and we paid to
Hongyuan Shengshi an earnest fee of RMB200 million. In December 2022, Hongyuan Shengshi went bankrupt, as a result of which, we
will not be able to reclaim the earnest fee in full or at all. As of December 31, 2022, Hongyuan Shengshi has returned a total of RMB
22.4 million to us.

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Furthermore, we have made loans to third parties including our franchisees, and other entities with which we have a business
relationship or strategic cooperation. Although our loans to such third parties are generally secured by collateral or a guarantee, some of
these third parties may not repay us, we may not be able to recover the loaned amounts of principal and any interest due, and we may
thereby incur losses which could have a material adverse effect on our financial condition and results of operations.
Our expansion into new markets may present increased risks.
We plan to open new hotels in markets in China as well as internationally where we have little or no operating experience. Those
markets may have different regulatory requirements, competitive conditions, consumer preferences and discretionary spending patterns
as compared to our existing markets. As a result, any new hotels we open in those markets may be less successful than hotels in our
existing markets. Guests and franchisees in any new market may not be familiar with our brands and we may need more time to build
brand awareness in that market through greater investments in advertising and promotional activities than we anticipated. We may find it
more difficult in new markets to hire, motivate and keep qualified employees who share our vision, passion and culture. Hotels operated
in new markets also may have lower average sales or higher operating costs than hotels in existing markets. Sales at hotels operated in
new markets may take longer than expected to ramp up and reach expected sales and profit levels, and may never do so, thereby affecting
our overall profitability.
Our financial condition and results of operations may be materially affected if our strategy to diversify our brand portfolio and mix of
hospitality offerings is not successfully implemented.
We intend to diversify our brand portfolio and mix of hospitality offerings with existing brands, including GreenTree Eastern, Gem,
Gya, Vx, Deep Sleep, Greentree Inns, GT Alliance, GreenTree Apartment, Vatica, Geli and Shell to cover market segments from
economy to business and mid-to-up-scale.
In addition, the strategy to diversify our mix of hospitality offerings may increase the cash needs of our operations and may distract
our management’s attention and energy. If such strategies are not successful, our business, financial condition and results of operations
may be materially and adversely affected.
If we fail to maintain our relationships with our members and corporate members, our business and growth prospects could be
materially and adversely affected.
Historically, we have derived a portion of our revenues from our members and from our cooperation arrangements with certain
corporate members such as banks, airlines and other large companies. In 2020, 2021 and 2022, we sold approximately 91% of our room
nights through our direct sales channels. We expect that these members and corporate members will contribute to the growth of our
business in the near future.
We cannot assure you that our members will remain loyal patrons of our hotels and that our corporate members will agree to renew
the relevant cooperation agreements upon their expiration, or enter into new agreements with us on substantially similar terms. Our
negotiating position with corporate members also is limited, given the competition in China’s hospitality industry. If we fail to enhance
or maintain our relationships with our members, and the frequency of member stays at our hotels declines as a result, or if our corporate
members decline to renew their cooperation agreements or propose new agreements with commercial terms less favorable to us, our
business and growth prospects could be materially and adversely affected.
If our franchisees are unable to maintain our hotels’ condition and appearance, our hotel occupancy rates may decline.
In order to maintain the condition and appearance of hotels in our network, our hotels require ongoing renovations and other
leasehold improvements, including periodic replacement of broken or used furniture, fixtures and equipment. Such investments and
expenditures require ongoing funding and, to the extent our franchisees cannot fund these expenditures from existing cash or cash flow
generated from operations, our franchisees must borrow or raise capital through financing. Our franchisees may not be able to access
capital and our franchisees may be unwilling to spend available capital when necessary, even if required by the terms of our franchise
agreements. If our franchisees continue to operate hotels while they are under refurbishment or improvement, there may be instances
where refurbishment or improvements would seriously disrupt hotel operations and adversely affect the revenues of the relevant hotels. If
our franchisees do not make needed leasehold investments and improvements, our hotels could become less attractive to our potential
guests, we could lose market share to our competitors and our hotel occupancy rates may decline. Moreover, disruptions and other risks
associated with renovation and improvements could have an adverse effect on our business, financial condition and results of operations.

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If the value of our brand portfolio or image diminishes, it could have a material and adverse effect on our business and results of
operations.
Our continued success in maintaining and enhancing our brand portfolio and image depends, to a large extent, on the ability of our
franchisees and us to satisfy customer needs by maintaining consistently high-quality services across our hotel network, as well as their
and our ability to respond to competitive pressures. If we and our franchisees are unable to do so, our occupancy rates may decline,
which could in turn adversely affect our results of operations. Our business may also be adversely affected if our brands, public image or
reputation were to be diminished by the operations of any of our hotels, whether due to our franchisees failing to operate hotels according
to our requirements, unsatisfactory service, accidents or otherwise. Our brand portfolio is integral to our sales and marketing efforts. In
addition, the trademark “GreenTree Inn” in the U.S. was registered by a company owned by Mr. Alex S. Xu, our chairman and chief
executive officer and currently used by a chain of 18 hotels in the U.S. owned by a company majority owned by Mr. Alex S. Xu. We
cannot exert control over any of these hotels in the United States. If these hotels experience any quality issues or are involved in any
incidents, despite the fact that our current operations are primarily in China, our reputation can be negatively affected, and the value and
image of our brands can diminish. If the value of our brand image is diminished or if our brands do not continue to be attractive to guests
and franchisees, our business and results of operations may be materially and adversely affected.
Our results of operations may fluctuate significantly due to seasonality and other factors.
The hospitality industry is subject to fluctuations in revenues due to seasonality. The seasonality of our business may cause
fluctuations in our quarterly operating results. Generally, the first quarter, in which both the New Year and Spring Festival holidays fall,
accounts for a lower percentage of our annual revenues than other quarters of the year. Furthermore, our overall results of operations may
fluctuate significantly from period to period because of several factors, including the timing of new hotel openings, revenue loss
associated with the temporary closure of existing hotels for refurbishment, and any losses incurred by our franchisees or us due to hotel
closures. As a result, our results of operations may fluctuate significantly from period to period and comparison of different periods, or
even the same periods during different years, may not be meaningful. Our results for a given fiscal period are not necessarily indicative
of results to be expected for any other fiscal period.
Substantial defaults or delays in payment by our franchisees and corporate customers or the deterioration of the financial condition
of our franchisees or corporate members may have an adverse effect on our cash flows, working capital, financial condition and
results of operations.
Our accounts receivable mainly consist of amounts due from our franchisees and corporate members whose employees are guests in
our leased-and-operated hotels. Our corporate members may choose to settle with us directly, and we typically require our franchisees to
pay various fees pursuant to their franchise agreements with us on a monthly or annual basis. Our franchisees and corporate members
may delay their payments beyond the time periods set forth in our agreed credit arrangements. Furthermore, in order to accelerate our
expansion, we used our surplus cash to finance the opening of new franchised-and-managed hotels by franchisees who have a proven
track record with us. There can be no assurance that our franchisees will always repay us timely once we begin the financing plan. Our
liquidity and cash flows from operations may be adversely affected if our accounts receivable cycles or collection periods lengthen or if
we encounter a material increase in defaults of payment of our accounts receivable or repayment of the amounts we have lent to our
franchisees.
Our operating results are affected by the ability of our franchisees to pay our franchise management fees. An extended period of
hotel room vacancy or decrease in room rates, which may be the result of a variety of factors such as unfavorable economic conditions in
China and globally, may adversely affect the operating results and financial condition of our franchisees. These negative operating
conditions could result in the financial failure of our franchisees and result in the delayed payment of franchise management fees or other
revenues derived from our franchised-and-managed hotels or the termination of their franchise agreements. As a result, our business,
prospects and results of operations may be adversely affected.

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Failure to retain our senior management could harm our business.
We place substantial reliance on the hospitality and other consumer-service industry experience and the institutional knowledge of
members of our senior management team. Mr. Alex S. Xu, our founder, chairman and chief executive officer, is particularly important to
our future success due to his substantial experience in the property development, hospitality and other consumer service industries. We
do not carry key person insurance on any members of our senior management team. The loss of the services of one or more of these
members of our senior management team due to their departure or otherwise could hinder our ability to effectively manage our business
and implement our growth strategies. Finding suitable replacements for Mr. Xu or other members of our senior management team could
be difficult, and competition for such personnel of similar experience is intense. If we lose their services, our business may be adversely
affected.
If we or our franchisees are not able to hire, train and retain qualified managerial and other employees, our brand and our business
may be materially and adversely affected.
Our managerial and other employees manage our hotels and interact with our guests on a daily basis. They are critical to maintaining
the quality and consistency of our services as well as our established brand and reputation. It is important for our franchisees and us to
attract qualified managerial and other employees who have experience in hospitality or other consumer-service industries and are
committed to high levels of service. There may be a limited supply of such qualified individuals in the cities in China where we and our
franchisees have operations or where we intend to expand. In addition, it is difficult to ascertain and evaluate intangible criteria of
candidates, and whether they will share our vision, dedication, passion and culture, during the recruitment process. We and our
franchisees must hire and train qualified managerial and other employees on a timely basis to keep pace with our rapid growth while
maintaining consistently high-quality services across our hotels in various geographic locations. Regular training needs to be provided to
our managerial and other employees so that they are equipped with up-to-date knowledge of various aspects of our hotel operations and
can meet our demand for quality services. We and our franchisees also need to offer opportunities for development and career
advancement in order to retain qualified managerial and other hotel staff. If we or our franchisees fail to do so, the quality of our services
may decrease in one or more of the markets where the hotels in our network are located, which in turn, may have a material and adverse
effect on our brand and our business.
Interruption or failure of our information and operational systems could impair our ability to effectively provide our services, which
could damage our reputation.
Our ability to provide consistent quality services throughout our hotel network depends on the operation of our proprietary
information and operational systems, including our central reservation, hotel management, data analysis and inter-department support
systems. Any damage to or failure of our systems could interrupt our service. Our systems are vulnerable to damage or interruption as a
result of power loss, telecommunications failures, computer viruses, fires, floods, earthquakes, interruptions in access to our toll-free
numbers, hacking or other attempts to harm our systems, and similar events. Our servers, which are maintained in Shanghai, may also be
vulnerable to break-ins, sabotage and vandalism. Some of our systems are not fully backed up, and our disaster recovery planning does
not account for all possible scenarios. In addition, our systems and technologies may become outdated and we may not be able to replace
or introduce upgraded systems as quickly as our competitors or within budgeted costs for such upgrades. If we experience frequent or
persistent system failures, our quality of services and our reputation could be harmed. The steps we need to take to increase the reliability
and safety of our systems may be costly, which could reduce our operating margins, and may not be successful in reducing the frequency
or duration of system failures and service interruptions.
Failure to maintain the integrity of internal or customer data could result in harm to our reputation or subject us to costs, liabilities,
fines or lawsuits.
Our business involves collecting and retaining a large volume of internal and customer data, including credit card numbers and other
personal information as our various information technology systems enter, process, summarize and report such data. We also maintain
information about various aspects of our operations as well as our employees. The integrity and protection of our customer, employee
and company data are critical to our business. Our customers and employees expect that we will adequately protect their personal
information. We are required by applicable laws to keep strictly confidential the personal information that we collect, and to take
adequate security measures to safeguard such information. Our security measures and those of our third-party service providers may not
be adequate for the protection of our customers, employees or company data.

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In addition, computer hackers, foreign governments or cyber terrorists may attempt to penetrate our network security and our
website. Unauthorized access to our proprietary internal and customer data may be obtained through break-ins, sabotage, breach of our
secure network by an unauthorized party, computer viruses, computer denial-of-service attacks, employee theft or misuse, breach of the
security of the networks of our third-party service providers, or other misconduct. Because the techniques used by computer
programmers who may attempt to penetrate and sabotage our proprietary internal and customer data change frequently and may not be
recognized until launched against a target, we may be unable to anticipate these techniques. Unauthorized access to our proprietary
internal and customer data may also be obtained through inadequate use of security controls. The laws and regulations applicable to
security and privacy are becoming increasingly important in China. The theft, loss, fraudulent or unlawful use of customer, employee or
company data could harm our reputation or result in remedial and other costs, liabilities, fines or lawsuits.
The Regulation (EU) 2016/679 of 27 April 2016 on the protection of natural persons with regard to the processing of personal data
and on the free movement of such data, and repealing Directive 95/46/EC, known as the general data protection regulation, or GDPR, has
imposed certain requirements on the processing of personal data relating to natural persons. GDPR requirements will apply both to
companies established in the EU and to companies, such as us, that are not established in the EU but process personal data of individuals
who are in the EU (and in the European Economic Area subject to the enactment of implementation procedures), where the processing
activities relate to: (a) the offering of goods or services, irrespective of whether a payment of the data subject is required, to such data
subjects in the EU; or (b) the monitoring of their behavior as far as their behavior takes place within the EU. Compliance with the GDPR
will be a rigorous and time-intensive process that may increase our cost of doing business, and the failure to comply with the GDPR
could expose us to sanctions from both a financial and business operations perspective. In addition, in case of control, noncompliance
with the GDPR may expose us to damage to our reputation.
On February 1, 2013, China’s initial personal data protection guidelines, the Guidelines for Personal Information Protection in
Information Security Technology Public and Commercial Service Systems, became effective, which guidelines set forth detailed
requirements as to the protection of personal information and data collection, data processing, data transfer and data creation. Although
these guidelines are voluntary and non-binding, we are advised by our PRC counsel that, going forward, further regulatory oversight of
data privacy in China is expected. In addition, Amendment 7 to the PRC Criminal Law prohibits institutions, companies and their
employees in the telecommunications and other industries from selling or otherwise illegally disclosing a PRC citizen’s personal
information obtained during the course of performing their duties or providing services, or obtaining such information through theft or
other illegal means. On November 7, 2016, the Standing Committee of the PRC National People’s Congress issued the Cybersecurity
Law of the PRC, which became effective on June 1, 2017. On August 20, 2021, the Standing Committee of the PRC National People’s
Congress issued the Personal Information Protection Law of the PRC, which became effective on November 11, 2021. Pursuant to such
law, providers of network products and services shall maintain the security of their products and services and shall comply with
provisions regarding the protection of personal information as stipulated under relevant laws and regulations. Moreover, the Provisions
on Protection of Personal Information of Telecommunication and Internet Users specifically regulates the collection, use, disclosure and
security of personal information. Complying with these PRC laws and regulations may cause us to incur substantial costs or require us to
change our business practices.
While we take various measures to comply with all applicable data privacy and protection laws and regulations of the PRC, our
current security measures and those of our third-party service providers may not be adequate for the protection of our customers,
employees or company data. In addition, hackers, foreign governments or cyber terrorists may attempt to penetrate our network security
and our website. Unauthorized access to our proprietary internal and customer data may be obtained through break-ins, sabotage, breach
of our secure network by an unauthorized party, computer viruses, computer denial-of-service attacks, employee theft or misuse, breach
of the secure networks of our third-party service providers, or other misconduct. Because the techniques used in any attempt to penetrate
and sabotage our proprietary internal and customer data change frequently and may not be recognized until launched against us, we may
be unable to anticipate or protect against these techniques. Unauthorized access to our proprietary internal and customer data may also be
obtained through inadequate security measures. Laws and regulations in China relating to security and privacy are becoming increasingly
important. Any theft, loss, fraudulent, unlawful use or disclosure of customer, employee or company data could harm our reputation and
result in remedial and other costs, liabilities, fines or lawsuits.

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Any failure to protect our trademarks and other intellectual property rights could negatively impact our business.
Our brand, trade name, trademarks and other intellectual property are critical to our success. The success of our business depends in
part upon our continued ability to use our brands, trade names and trademarks to increase brand awareness and to further develop our
brands. As of December 31, 2022, we had a total of 456 trademarks, 74 software registration certificates, and one copyright registered in
China. The expiration dates of our trademarks fall between 2023 and 2033. Once the ten-year term of our registered trademarks has
expired, we will be able to renew our trademark registrations for another ten years upon paying a renewal fee. If we are unable to renew
one or more trademark registrations, our ability to use such trademarks could be impaired, and our business and results of operations
could be materially and adversely affected.
Furthermore, the unauthorized reproduction or infringement of our trade name or trademarks or other intellectual property could
diminish the value of our brand and its market acceptance, competitive advantage or goodwill. For example, our proprietary operational
IT system, which has not been patented, copyrighted or otherwise registered as our intellectual property, is a key component of our
competitive advantage and our growth strategy. As of December 31, 2022, we have received 74 software registration certificates for
certain of our proprietary information and operational systems including our Central Reservation System (CRS), Property Management
System (PMS) and certain other quality control systems. Although we have been granted software registration certificates in respect of
some of our proprietary information and operational systems, these systems could be infringed upon by third parties, which may
adversely affect our business, financial condition and results of operations. Because the protection of a company’s intellectual property
provided under PRC laws and regulations is less than that afforded under United States laws and regulations, the measures we take to
protect our brands, trade names, trademarks and other intellectual property rights may not be adequate to prevent their unauthorized use
by third parties. Furthermore, the application of laws governing intellectual property rights in China and abroad is uncertain and
evolving, and could involve substantial risks to us. If we are unable to adequately protect our brands, trade names, trademarks and other
intellectual property rights, we may lose these rights and our business may suffer materially. For example, in order to protect our brands,
in the past we have filed lawsuits against certain hotel operators which had alleged to be our franchised-and-managed hotels but have not
entered into any agreements with us.
We could also be subject to claims for infringement, invalidity, or indemnification relating to third parties’ intellectual property
rights. Such third-party claims may be time-consuming and costly to defend, divert management attention and resources, or require us to
enter into licensing agreements, which may not be available on commercially reasonable terms, or at all.
The restaurants operated by our hotels face risks related to instances of food-borne illnesses and other food safety accidents.
Some of our hotels directly operate the restaurant located in the hotels. The restaurant business is susceptible to food-borne illnesses
and other food safety accidents. We cannot assure you that our internal controls and training will be fully effective in preventing all food-
borne illnesses. Furthermore, our reliance on third-party food suppliers and distributors increases the risk that food-borne illness
incidents could be caused by third-party food suppliers and distributors outside of our control and the risk of multiple locations being
affected rather than a single restaurant. New illnesses resistant to any precautions may develop in the future, or diseases with long
incubation periods could arise that could give rise to claims or allegations on a retroactive basis. Reports in the media of instances of
food-borne illnesses could, if highly publicized, negatively impact restaurant sales, forcing the closure of some restaurants and affect our
customers’ confidence in our hotel business. Furthermore, other illnesses, such as hand, foot and mouth disease or avian influenza, could
adversely affect the supply of some of the restaurants’ food products and significantly increase such restaurants’ costs, which may also
adversely affect the results of operations of the relevant hotels.
Accidents or injuries in our hotels may adversely affect our reputation and subject us to liability.
There are inherent risks of accidents or injuries in hotels. One or more accidents or injuries such as fire accident, slip and fall and
accident during property renovation at any of our hotels could adversely affect our safety reputation among guests and potential guests,
decrease our overall occupancy rates and increase our costs by requiring us to take additional measures to make our safety precautions
even more visible and effective. If accidents or injuries occur at any of our hotels, we may be held liable for costs related to the injuries.
Our property and liability insurance policies may not provide adequate coverage and we may be unable to renew our insurance policies
or obtain new insurance policies without increases in cost or decreases in coverage levels.

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In addition, if any incidents, particularly fire accidents, occur in any of the leased-and-operated hotels that do not possess the
relevant licenses, permits, title certificate or fire safety inspection certificate, or is located on properties where the actual use and the
designated land or property use are inconsistent, there could be substantial negative publicity, thereby triggering large-scale government
actions that impact our entire hotel network, which in turn will have a material adverse impact on our business, results of operations and
financial condition.
We are subject to risks related to litigation filed by or against us, and adverse litigation results may harm our business and financial
condition.
We have been, and may in the future be, a party to litigation and other proceedings filed by or against us, including actions relating
to among others property lease, franchise agreements with our franchisees, infringement of our brands, employment-related disputes,
personal injury, property damage or other harm resulting from acts or omissions by individuals or entities outside of our control,
including franchisees and third-party property owners. Various disputes in connection with the properties we lease or with the franchise
agreements may occur from time to time, which may cause our hotel operations to be affected or in the worst-case scenario, to be ceased.
For example, as of December 31, 2022 we had three pending legal proceedings in connection with the leased hotel properties, 10 pending
legal proceedings in connection with trademarks, and 15 pending legal proceedings in connection with franchised-and-managed hotels.
In addition, the research and examinations that we conduct on both the hotel properties and the potential franchisees before entering into
franchise agreements, may not be sufficient for us to identify all relevant information. As a result, we may be in dispute with our
franchisees, which may result in litigation filed by or against us. See “Our Business — Legal Proceedings.”
The outcome of legal proceedings is uncertain, we cannot predict with certainty the cost of defense, the cost of prosecution or the
ultimate outcome of thereof, including remedies or damage awards, and adverse results in such litigation and other proceedings may
disrupt our business, materially and adversely affect our reputation, results of operations, financial condition and prospects. Moreover, if
any claims against us were to prevail, we would be subject to monetary or other liabilities, which could strain our financial resources,
consume the time and attention of our management and otherwise have an adverse effect on our business, financial condition and results
of operations.
Our lessors’ failure to comply with lease registration and other compliance requirements under PRC law may subject these lessors or
us to fines or other penalties that may negatively affect our ability to operate our hotels.
As an operator and manager of our leased hotel properties, we are subject to a number of land- and property-related legal
requirements. For instance, under PRC law, all lease agreements are required to be registered with the local land and real estate
administration bureau. Our standard lease agreement generally requires the lessor to make such registrations. However, as of December
31, 2022, because our lessors failed or were reluctant to provide necessary documents for us to register the leases, 57 lessors of our
leased-and-operated hotels had not obtained registrations of their leases from the relevant authorities as required despite our repeated
requests to these lessors to obtain registrations, as required under our lease agreements with them. In addition, based on the specific land
use right certificates and property ownership certificates held by some of our lessors of the leased-and-operated hotels, approximately
half of the 61 hotel properties we own or lease and operate are restricted to industrial and other uses, rather than qualified for hotel
operation use. The failure of these 57 lessors to register lease agreements as required by law or to ensure that the hotel properties are
operated in compliance with their designated use may subject these lessors or us to fines or other penalties in the amount of up to
RMB10,000 for each hotel property or approximately RMB310,000 in aggregate, which may negatively affect our ability to operate the
hotels covered under those leases. Moreover, the failure to use the property in compliance with the intended usage designated by the land
use right certificates or the property ownership certificates may subject the lessors or us to fines in the amount of up to RMB30,000 for
each property, invalidate the lease agreements, confiscation of relevant gains or subject them or us to temporary suspension or
termination of operations.

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We are subject to various claims and disputes in the ordinary course of business, and increases in the amount or severity of these
claims and disputes could adversely affect us.
We are exposed to various claims and disputes related to commercial operations, personal injury, property damage, labor disputes
and other matters in the ordinary course of our business. Developments in regulatory, legislative or judicial standards, material changes to
dispute resolution trends, or a catastrophic accident or series of accidents, including accidents that affect our franchisees or vendors,
involving any or all of commercial operations, property damage, personal injury, and labor disputes could have a material adverse effect
on our operating results, financial condition and reputation.
For example, as of December 31, 2022, approximately 10.9% of our room nights are booked through OTAs, to whom we pay agency
fees for such services. If we were to have a dispute with an OTA, the volume of our room inventory booked through such OTA may
decline, or the OTA may block reservations of our rooms or remove our hotels from their website entirely, pending resolution of the
dispute. As a result, our business and results of operations may be adversely affected.
In addition, our franchisees may suspend or terminate their cooperation with us voluntarily or involuntarily due to various reasons,
including disagreement or dispute with us, failure to maintain requisite approvals, licenses or permits or to comply with other
governmental regulations, and events beyond our or their control, such as inclement weather, natural disasters, transportation
interruptions or labor unrest or shortage. For example, franchisees of our brand may object to or decline to pay franchise fees charged by
us. Due to intense competition in China’s hospitality industry, our existing franchisees may also discontinue their cooperation with us and
work with our competitors instead. We may not be able to promptly replace our franchisees on a timely and cost-effective basis, or at all.
As a result of any disruptions associated with our franchisees, our guest satisfaction, brands, reputation, operations and financial
performance may be materially and adversely affected.
We may encounter disputes from time to time relating to our use of intellectual property of third parties.
We may encounter disputes from time to time over rights and obligations concerning intellectual property, and we may not prevail in
those disputes. We cannot assure you that personnel in our leased-and-operated hotels will not use intellectual property of third parties
without proper authorization. We may incur liability for such unauthorized or infringing use, and be subject to additional claims in the
future. Any such claim of infringement or unauthorized use of intellectual property could result in costly litigations and divert the
attention and resources of our management.
The growth of online and other hotel reservation intermediaries and travel consolidators may adversely affect our margins and
profitability.
In 2020, 2021 and 2022, approximately 8.9% of our room nights were booked through OTAs to whom we pay commissions for such
services. If these intermediaries and consolidators become the primary channel through which our guests make their bookings, they may
be able to negotiate higher commissions, reduced room rates, or other significant concessions from us. The operations of these travel
intermediaries and consolidators may adversely affect our ability to control the supply and price of our room inventory, which would in
turn adversely affect our margins and profitability.
We are a “controlled company” within the meaning of the NYSE Listed Company Manual.
GTI beneficially owns 83.9% of our Class A ordinary shares, 100% of our Class B ordinary shares and 93.7% of the aggregate
voting power of our total issued and outstanding share capital. The voting power of our company owned by GTI is indirectly owned by
Mr. Alex S. Xu, our founder, chairman and chief executive officer, as he owns 83.9% of voting power of GTI, which entitles Mr. Xu to
nominate or replace all directors of GTI, and determine how GTI exercises the voting power in our company. As long as GTI or Mr. Alex
S. Xu owns at least 50% of the voting power of our company, we will be a “controlled company” as defined under the NYSE Listed
Company Manual. For so long as we remain a controlled company under that definition, we are permitted to elect to rely on certain
exemptions from corporate governance rules, including an exemption from the rule that a majority of our board of directors must be
independent directors, although we have no current intention to rely on the controlled company exemption. As a result, you may not have
the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.

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Our financial and operating performance may be adversely affected by epidemics, natural disasters and other catastrophes.
Our financial and operating performance may be adversely affected by epidemics, natural disasters and other catastrophes,
particularly in locations where we operate a large number of hotels. China has in the past experienced significant natural disasters,
including earthquakes in Western and Southwestern China, extreme weather conditions, as well as health scares related to epidemic
diseases, and any similar event that could materially impact our business in the future. If a disaster or other disruption were to occur in
the future that affects the regions where we have or are developing franchised-and-managed or leased-and-operated hotels, our operations
could be materially and adversely affected due to loss of personnel and damages to property. Even if we are not directly affected, such a
disaster or disruption could affect our guests, which could harm our results of operations.
In addition, our business could be affected by public health epidemics, such as the outbreak of avian influenza, severe acute
respiratory syndrome, or SARS, Zika virus, Ebola virus, COVID-19 or other diseases. If any of our employees is suspected of having
contracted a contagious disease, we may be required to apply quarantines or suspend our operations. Furthermore, any future outbreak
may restrict economic activities in affected regions, resulting in reduced business volume, temporary closure or quarantine of hotels in
operation or otherwise disrupt our operations and adversely affect our results of operations.
Losses caused by epidemics, natural disasters and other catastrophes, including SARS, H1N1, H7N9 influenza, COVID-19,
earthquakes or floods, are either uninsurable or too expensive to justify insuring against in China. In the event an uninsured loss or a loss
in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a hotel, as well as the anticipated
future revenue from the hotel. In that event, we might nevertheless remain obligated for any financial obligations related to the hotel.
Similarly, war (including the potential of war), terrorist activities (including the threat of terrorist activities), social unrest and heightened
travel security measures, as well as geopolitical uncertainty and international conflict may affect travel and may in turn affect our
business, financial conditions, and results of operations. If our franchised-and-managed hotels are affected by these incidents, we might
lose our revenue stream from those hotels. In addition, we may not be adequately prepared in contingency planning or recovery
capability in relation to a major incident or crisis, and as a result, our operational continuity may be adversely affected and our reputation
may be harmed.
We have limited insurance coverage.
We carry property insurance that covers the assets that we own at our leased-and-operated hotels, but such property insurance does
not cover the buildings or any other assets owned by our lessors or the assets of the franchised-and-managed hotels. Although we
generally require our lessors and our franchisees to purchase customary insurance policies, we cannot guarantee that they will adhere to
such requirements. We do not have business disruption insurance coverage for our operations to cover losses that may be caused by
natural disasters or catastrophic events, such as SARS or avian flu. Any business disruption or natural disaster may result in our incurring
substantial costs and diversion of our resources. In addition, there are inherent risks of accidents or injuries in hotels. One or more
accidents or injuries at any of our hotels could adversely affect our safety reputation among customers and potential customers, decrease
our overall occupancy rates and increase our costs by requiring us to take additional measures to make our safety precautions even more
visible and effective. In the future, we may be unable to renew our insurance policies or obtain new insurance policies without increases
in cost or decreases in coverage levels. We may also encounter disputes with insurance providers regarding payments of claims that we
believe are covered under our policies. If we were held liable for amounts and claims exceeding the limits of our insurance coverage or
outside the scope of our insurance coverage, our reputation, our business, results of operations and financial condition may be materially
and adversely affected.
We may require additional financing for our business, which may not be available on terms acceptable to us, or at all, or would
increase our financial leverage and may be difficult to service.
We may require additional financial resources to support our growth, future development and any investments, including mergers or
acquisitions that we may pursue. The amount and timing of such additional financing needs will vary depending on the timing of our new
hotel openings, investments in converting new leased-and-operated hotels and searching and developing relationships with potential
franchisees and the amount of cash flow from our operations. If our internal resources are insufficient to satisfy our financing
requirements, we may seek additional financing by selling additional equity or debt securities or obtaining a credit facility. The sale of
additional equity securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in
increased debt service obligations and could result in operating and financing covenants that may, among other things, potentially restrict
our operations or our ability to pay dividends. Servicing such debt obligations could also be burdensome to our operations. If we fail to
service our debt obligations or are unable to comply with the relevant debt covenants, we could be in default under the relevant debt
obligations and our liquidity and financial conditions may be materially and adversely affected.

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Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including:
●
investors’ perception of, and demand for, securities of businesses in the PRC hospitality industry;
●
conditions of the U.S. and other capital markets in which we may seek to raise funds;
●
our future results of operations, financial condition and cash flows;
●
PRC governmental regulation of foreign investment in the hospitality industry in China;
●
economic, political and other conditions in China; and
●
PRC governmental policies relating to foreign currency borrowings.
We cannot assure you that future financing will be available in amounts or on terms acceptable to us, if at all. If we fail to raise
additional funds, we may need to sell debt or additional equity securities, reduce our growth to a level that can be supported by our cash
flow or defer planned expenditures.
We will continue to recognize a substantial amount of share-based compensation expenses, which will have a significant impact on
our financial condition and liquidity position.
We adopted our 2018 share incentive plan in January 2018, pursuant to which we may grant options to purchase up to 9,000,000 of
our Class A ordinary shares. Options granted to our employees generally vest either ratably over the following four years starting after
the first/second/third anniversary of date of our initial public offering in the U.S., or 50% on the date of our initial public offering in U.S.
and another 50% on December 31, 2019, as applicable; options granted to our directors vested 100% on the first anniversary of the date
of our initial public offering in the U.S. As of December 31, 2022, we had outstanding options with respect to 940,500 Class A ordinary
shares that have been granted to our employees, directors and consultants under the 2018 share incentive plan. As a result of our grants of
awards under the 2018 Plan, we incurred share-based compensation expenses of RMB0.23 million, RMB2.46 million and RMB-0.06
million (US$-0.01 million) in 2020, 2021 and 2022. We are required to account for share options granted to our employees, directors and
consultants in accordance with Codification of Accounting Standards, or ASC 718, “Compensation — Stock Compensation” and ASC
505-50, “Equity, Equity-Based Payments to Non-Employees.” We will continue to incur and recognize additional share-based
compensation expenses in the future as we continue to grant share-based incentives. We believe such incentives are necessary for us to be
able to attract and retain key personnel and employees, and we will continue to grant share-based compensation to employees in the
future. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our
financial condition and liquidity position.
A material weakness in our internal control over financial reporting has been identified. If we fail to maintain an effective system of
internal controls over financial reporting, we may not be able to accurately report our financial results, meet our reporting
obligations or prevent fraud.
We are required to assess the effectiveness of our disclosure controls and procedures and internal control over financial reporting.
Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. As defined
in standards established by the United States Public Company Accounting Oversight Board, or the PCAOB, a “material weakness” is a
deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a
material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. In
connection with the audit of our consolidated financial statements for the year ended December 31, 2021, we and our independent
registered public accounting firm identified a material weakness in accordance with the standards established by the PCAOB, which
relates to our material weakness in controls over the completeness of the bad debt provision for our franchisee loans receivable.We
implemented certain measures to improve our internal control over financial reporting to address the material weakness that was
previously identified. See “Item 15. Controls and Procedures —Internal Control over Financial Reporting” in our annual report on Form
20-F for the fiscal year ended December 31, 2022, filed with the SEC on April 28, 2023.

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We are a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of
2002, or Section 404, required that we include a report of management on our internal control over financial reporting in our annual
report on Form 20-F. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our
independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial
reporting. Our independent registered public accounting firm did not undertake a comprehensive assessment of our internal control for
purposes of identifying and reporting material weaknesses in our internal control over financial reporting as they will be required to do
after we cease to be an emerging growth company. In the future our management may again conclude that our internal control over
financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is
effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is
qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed,
or if it interprets the relevant requirements differently from us. In addition, after we became a public company, our reporting obligations
have placed and continue to place a significant strain on our management, operational and financial resources and systems for the
foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation. In addition, we may not be
able to timely file our periodic reports as a public company under U.S. securities laws, which could limit the amount of information that
investors receive about our company in the future and adversely affect the price of our ADSs, our business and our reputation.
In the future in documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may
identify new material weaknesses in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our
internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may identify
new material weaknesses in our internal control over financial reporting. If we fail to achieve and maintain an effective internal control
environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would
likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets,
harm our results of operations, and lead to a decline in the trading price of our ADSs.
Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate
assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal
sanctions. We may also be required to restate our financial statements from prior periods.
Going forward we expect to generate a significant portion of our revenues from the restaurant business, which involves risks and
uncertainties.
In March 2023, we completed our acquisition of Da Niang Dumplings and Bellagio, two leading restaurant chain businesses in
China, or collectively, the Target Businesses, from GTI, our controlling shareholder. See “Item 4. Information on the Company—A.
History and Development of the Company—Acquisition of Da Niang Dumplings and Bellagio.” Going forward, we expect to generate a
significant portion of our revenues from the restaurant business, which involves risks and uncertainties that differ from our hotel
business. Risks and uncertainties related to the restaurant business operated by Da Niang Dumplings and Bellagio include, but are not
limited to, the following:
●
if the quality of our dining experience declines, our restaurants may not continue to be successful;
●
we may fail to maintain or enhance recognition and reputation of our brands;
●
we may not be able to maintain and increase the sales and profitability of our existing restaurants;
●
if we cannot obtain desirable restaurant locations or secure renewal of existing leases on commercially reasonable terms,
our business, results of operations and financial condition will be adversely affected;
●
food safety and foodborne illness concerns may have an adverse effect on our reputation and business;
●
any significant failure to maintain effective quality assurance systems for our restaurants could have a material adverse
effect on our business, reputation, results of operations and financial conditions;

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●
any significant liability claims, food contamination complaints from our customers or reports of incidents of food
tampering could adversely affect our business, reputation, results of operations and financial condition;
●
increases in the cost of ingredients used in our restaurants may lead to declines in our margins and operating results; and
●
we rely on third parties for supplies and services and any shortage or interruption in supply could slow our growth and
reduce our profitability.
We are an “emerging growth company” and may not be subject to requirements that other public companies are subject to, which
could harm investor confidence in us and our ADSs.
The Jumpstart Our Business Startups Act, or the JOBS Act, contains provisions that, among other things, relax certain requirements
for qualifying public companies. We are an “emerging growth company” as defined under the JOBS Act and, for as long as we continue
to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to
other public companies, including an exemption from the requirement to comply with the auditor attestation requirements of Section 404
and an exemption from the requirement to adopt and comply with new or revised accounting standards at the same time as other public
companies. We will remain an emerging growth company until the earliest of (i) the last day of our fiscal year during which we have total
annual gross revenues of at least US$1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the completion of
our initial public offering; (iii) the date on which we have, during the previous three year period, issued more than US$1.0 billion in non-
convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as
amended, or the Exchange Act, which would occur if the market value of our ADSs that are held by non-affiliates exceeds US$700
million as of the last business day of our most recently completed second fiscal quarter.
The JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in
Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth
company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We
will take advantage of the extended transition period. As a result of this election, our financial statements may not be comparable to other
public companies that comply with the public company effective dates for these new or revised accounting standards.
We also expect that these new rules and regulations could make it more expensive for us to renew director and officer liability
insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could
also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit
committee.
We cannot predict if investors will find our ADSs less attractive because we may rely on these exemptions. If some investors find
our ADSs less attractive as a result, there may be a less active trading market for our ADSs and our ADS price may be more volatile.
Risks Related to Our ADSs
The market price for our ADSs may be volatile.
The market price for our ADSs may be highly volatile and subject to wide fluctuations in response to factors including the
following:
●
negative media reports and coverage regarding us or other companies in the hospitality industry;
●
regulatory developments in our target markets affecting us, our customers or our competitors;
●
announcements of studies and reports relating to the quality of our solutions or those of our competitors;
●
actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results;

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●
changes in financial estimates by securities research analysts;
●
conditions in the travel and hospitality industries;
●
changes in the economic performance or market valuations of other hospitality companies;
●
announcements by us or our competitors of new brands, acquisitions, strategic relationships, joint ventures or capital
commitments;
●
addition or departure of our senior management;
●
fluctuations of exchange rates between the RMB and U.S. dollar;
●
potential litigation or administrative investigations;
●
release or expiry of lock-up or other transfer restrictions on our outstanding ADSs or ordinary shares;
●
sales or perceived potential sales of additional ordinary shares or ADSs; and
●
general economic or political conditions in China.
In addition, the securities market from time to time experiences significant price and volume fluctuations that are not related to the
operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of
our ADSs.
We may not pay further dividends to our public shareholders, so you should rely on price appreciation of our ADSs for return on
your investment.
In January 2019, our board of directors declared a cash dividend of US$0.30 per ordinary share, or US$0.30 per ADS, and we paid
such dividend in full in February 2019. In January 2019, we also announced plans to pay a cash dividend of US$0.20 per ordinary share
per year in the near future if there is no immediate cash need for our growth or merger and acquisition opportunities. However, our board
of directors has discretion as to whether to distribute any future dividends, subject to certain requirements of Cayman Islands law. In
December 2019, we declared a cash dividend of US$0.25 per ordinary share, or US$0.25 per ADS. Holders of our ordinary shares and
ADSs as of the close of trading on December 24, 2019 were entitled to such cash dividend, and we paid such dividend in full in
January 2020. In December 2021, we declared a cash dividend of US$0.55 per ordinary share, or US$0.55 per ADS. Holders of our
ordinary shares and ADSs as of the close of trading on December 31, 2021 were entitled to such cash dividend, and we paid such
dividend in full in January 2022. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share
premium account, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its
debts as they fall due in the ordinary course of business. Even if our board of directors decides to declare and pay dividends, the timing,
amount and form of future dividends, if any, may depend on, among other things, our future results of operations and cash flow, our
capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition,
contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our
ADSs will likely depend entirely upon any future price appreciation of our ADSs. There is no guarantee that our ADSs will appreciate in
value or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in our ADSs and
you may even lose your entire investment in our ADSs.

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Substantial future sales of our ADSs, or other equity or equity-linked securities in the public market, or the perception that these
sales could occur, could cause the price of our ADSs to decline.
Additional sales of our ADSs, or other equity or equity-linked securities in the public market after our initial public offering, or the
perception that these sales could occur, could cause the market price of our ADSs to decline. As of December 31, 2022, we had
102,178,955 ordinary shares outstanding including 34,762,909 Class B ordinary shares and 67,416,046 Class A ordinary shares,
10,826,746 Class A ordinary shares of which are represented by ADSs. All Class A ordinary shares represented by ADSs are freely
transferable without restriction or additional registration under the Securities Act. The 34,762,909 Class B ordinary shares and
56,589,300 Class A ordinary shares held by our existing shareholders are available for sale, subject to volume and other restrictions as
applicable under Rule 144 and 701 under the Securities Act.
Our corporate actions are substantially controlled by our officers, directors and principal shareholders.
Our executive officers and directors beneficially own approximately 89.5% of our outstanding shares. These shareholders could
exert substantial influence over matters requiring approval by our shareholders, including electing directors and approving mergers or
other business combination transactions. The concentration of our share ownership may discourage, delay or prevent a change in control
of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our
company and might reduce the price of our ADSs. These actions may be taken even if they are opposed by our other shareholders,
including holders of our ADSs.
As a foreign private issuer, we are permitted to adopt certain practices of our home country, the Cayman Islands, in relation to
corporate governance matters that differ significantly from the New York Stock Exchange corporate governance listing standards;
these practices afford less protection to shareholders than they would enjoy if we complied fully with the New York Stock Exchange
corporate governance listing standards.
Our ADSs are listed on the New York Stock Exchange. The New York Stock Exchange Listed Company Rules permit a foreign
private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the
Cayman Islands, which is our home country, may differ significantly from the New York Stock Exchange corporate governance listing
standards.
For instance, we are not required to: (i) have a majority of the board be independent; (ii) have a compensation committee or a
nomination or corporate governance committee consisting entirely of independent directors; (iii) have regularly scheduled executive
sessions with only independent directors each year; or (iv) have a minimum of three members on our audit committee. We intend to rely
on some or all of these exemptions. As a result, you may not be provided with the benefits of certain corporate governance requirements
of the New York Stock Exchange.

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As a foreign private issuer in the U.S., we are exempt from certain disclosure requirements under the Exchange Act, which may
afford less protection to holders of our ADSs than they would enjoy if we were a domestic U.S. company.
As a foreign private issuer in the U.S., we are exempt from, among other things, the rules prescribing the furnishing and content of
proxy statements under the Exchange Act and the rules relating to selective disclosure of material nonpublic information under
Regulation FD under the Exchange Act. In addition, our executive officers, directors and principal shareholders are exempt from the
reporting and short-swing profit and recovery provisions contained in Section 16 of the Exchange Act. In addition to annual reports with
audited financial statements, such domestic U.S. companies are required to file quarterly reports with the SEC that include interim
financial statements reviewed by an independent registered public accounting firm and certified by the company’s principal executive
and financial officers. By contrast, as a foreign private issuer, we are not required under the Exchange Act to file such reports with the
SEC or to provide quarterly certifications by our principal executive and financial officers. As a result, holders of our ADSs may be
afforded less protection than they would under the Exchange Act rules applicable to domestic U.S. companies.
You may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able
to exercise your right to direct how the ordinary shares underlying your ADSs are voted.
Except as described in this annual report and in the deposit agreement, holders of our ADSs will not be able to exercise voting rights
attaching to the shares evidenced by our ADSs on an individual basis. Holders of our ADSs will appoint the depositary or its nominee as
their representative to exercise the voting rights attaching to the shares represented by the ADSs. You may not receive voting materials in
time to instruct the depositary to vote, and it is possible that you, or persons who hold their ADSs through brokers, dealers or other third
parties, will not have the opportunity to exercise a right to direct how the ordinary shares underlying your ADSs are voted.
If we ask for your instructions and upon timely notice from us, the depositary will notify you of the upcoming vote and arrange to
deliver our voting materials to you, which contain, among other things, a statement as to the manner in which your voting instructions
may be given, including an express indication that such instructions may be given or deemed given to the depositary to give a
discretionary proxy to a person designated by us if no instructions are received by the depositary from you on or before the response date
established by the depositary. However, no voting instruction shall be deemed given and no such discretionary proxy shall be given with
respect to any matter if we inform the depositary we do not wish such proxy given, substantial opposition exits or the matter materially
and adversely affects the rights of holders of the ordinary shares.
Voting at any meeting of our shareholders will be by poll.
You may not be able to participate in any future rights offerings which may cause dilution to your holdings and you may not receive
cash dividends if it is impractical to make them available to you.
We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make
rights available to you in the United States unless we register both the rights and securities to which the rights relate under the Securities
Act or an exemption from the registration requirements is available. Under the deposit agreement for the ADSs, the depositary will not
offer those rights to ADS holders unless both the rights and the underlying securities to be distributed to ADS holders are either
registered under the Securities Act, or exempt from registration under the Securities Act. We are under no obligation to file a registration
statement with respect to any such rights or underlying securities or to endeavor to cause such a registration statement to be declared
effective. In addition, we may not be able to establish a necessary exemption from registration under the Securities Act. Accordingly,
holders of our ADSs may be unable to participate in our rights offerings and may experience dilution in their holdings as a result.
GTI intends to register and distribute to each of its shareholders not more than 60% of the number of our shares that represented
the percentage of such shareholder’s ownership in GTI as of March 29, 2018, the closing date of our initial public offering. As a
condition to receive our shares, GTI’s shareholders were required to enter into lock-up agreements on all of our shares which they own,
and the number of our shares subject to such lock-up agreements was reduced by 25% at the end of each six month period following
March 26, 2018, the date of our initial public offering prospectus.

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The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our
ordinary shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to
the number of ordinary shares your ADSs represent. However, the depositary may, at its discretion, decide that it is inequitable or
impractical to make a distribution available to any holders of ADSs. For example, the depositary may determine that it is not practicable
to distribute certain property through the mail, or that the value of certain distributions may be less than the cost of mailing them. In these
cases, the depositary may decide not to distribute such property to you.
You may be subject to limitations on transfer of your ADSs.
Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from
time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver,
transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the
depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any
provision of the deposit agreement, or for any other reason.
You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be
limited, because we are incorporated under Cayman Islands law, conduct substantially all of our operations in China and most of our
directors and substantially all of our executive officers reside outside the United States.
We are incorporated in the Cayman Islands, and conduct substantially all of our operations in China through our wholly-owned
entities. Most of our directors and substantially all of our executive officers reside outside the United States and a substantial portion of
their assets are located outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us or
against these individuals in the Cayman Islands or in China in the event that you believe that your rights have been infringed under the
securities laws or otherwise. Even if you are successful in bringing an action of this kind in a U.S. court, the laws of the Cayman Islands
and of China may render you unable to enforce a judgment against our assets or the assets of our directors and executive officers. There
is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands
will, at common law, recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without any
reexamination of the merits of the underlying dispute on the principle that a judgment of a competent court imposes upon the judgment
debtor an obligation to pay the liquidated sum for which such judgment has been given, provided such judgment (1) is given by a foreign
court of competent jurisdiction, (2) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been
given, (3) is final and conclusive, (4) is not in respect of taxes, a fine or penalty, (5) is not inconsistent with a Cayman Islands judgment
in respect of the same matter, and (6) is not impeachable on the grounds of fraud and was not obtained in a manner and is not of a kind
the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands. However, the Cayman Islands courts
are unlikely to enforce a judgment obtained from the United States courts under the civil liability provisions of the securities laws if such
judgment is determined by the courts of the Cayman Islands to give rise to obligations to make payments that are penal or punitive in
nature. A Cayman Islands court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.
Our corporate affairs are governed by our memorandum and articles of association, as amended and restated from time to time, and
by the Cayman Companies Act (As Revised) and as well as common law of the Cayman Islands. The rights of shareholders to take legal
action against us and our directors, actions by minority shareholders and the fiduciary duties of our directors are to a large extent
governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively
limited judicial precedent in the Cayman Islands as well as from English common law, which provides persuasive, but not binding,
authority in a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands
law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman
Islands has a less developed body of securities laws than the United States and provides significantly less protection to investors. In
addition, shareholders in Cayman Islands companies may not have standing to initiate a shareholder derivative action in U.S. federal
courts.
As a result of the foregoing, our public shareholders may have more difficulty in protecting their interests through actions against us,
our management, our directors or our major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the
United States.

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39
The ability of the SEC, the U.S. Department of Justice, or the DOJ, and other U.S. authorities to bring enforcement actions against
us for any violation of U.S. federal securities laws, SEC rules or regulations may be limited in the foreign jurisdictions where we
operate.
The ability of U.S. authorities, such as the SEC and the DOJ, to bring enforcement actions against companies such as ours which
operate overseas for any violation of U.S. federal securities laws, SEC rules or regulations may be limited in China, where we operate.
Due to jurisdictional limitations, matters of comity and various other factors, the SEC, the DOJ and other U.S. authorities may be limited
in their ability to pursue bad actors, including in instances of fraud, in emerging markets such as China. There are significant legal and
other obstacles for U.S. authorities to obtain information needed for investigations or litigation against us or our directors, executive
officers or other gatekeepers in case we or any of these individuals engage in fraud or other wrongdoing. In addition, local authorities in
China may be constrained in their ability to assist U.S. authorities and overseas investors more generally. For example, certain provisions
of PRC law prohibit entities and individuals in China from providing documents or information relating to securities business activities
to overseas regulators without the approval of the CSRC and various other PRC government authorities. See “Item 3. Key Information
— D. Risk Factors— Risks Related to Doing Business in China — Uncertainties with respect to the Chinese legal system could
adversely affect us.” As a result, if we have any material disclosure violation or if our directors, executive officers or other gatekeepers
commit any fraud or other financial misconduct, the U.S. authorities may not be able to conduct effective investigations or bring and
enforce actions against us, our directors, executive officers or other gatekeepers. Therefore, you may not be able to enjoy the same
protection provided by various U.S. authorities as it is provided to investors in U.S. domestic companies.
Our management has considerable discretion as to the use of the net proceeds from our initial public offering.
Our management has considerable discretion in the application of the net proceeds received by us from our initial public offering.
You do not have the opportunity to assess whether proceeds are being used appropriately. You must rely on the judgment of our
management regarding the application of the net proceeds of our initial public offering. The net proceeds may be used for corporate
purposes that do not improve our efforts to maintain profitability or increase our ADS price. The net proceeds from our initial public
offering may be placed in investments, such as short-term investments, that do not produce income or that lose value.
Our articles of association contain anti-takeover provisions that could have an adverse effect on the rights of holders of our ordinary
shares and ADSs.
Our amended and restated memorandum and articles of association contain provisions which could limit the ability of others to
acquire control of our company, including a provision that grants authority to our board directors to establish from time to time one or
more series of preferred shares without action by our shareholders and to determine, with respect to any series of preferred shares, the
terms and rights of that series. The provisions could deprive our shareholders of the opportunity to sell their shares at a premium over the
prevailing market price by discouraging third parties from seeking to obtain control of our company in a tender offer or similar
transactions.
We may become a passive foreign investment company, or PFIC, which could result in adverse U.S. tax consequences to U.S.
investors.
The determination of whether or not we are a PFIC is made on an annual basis and will depend on the nature and composition of our
income and assets from time to time. Specifically, for any taxable year, we will be classified as a PFIC for U.S. federal income tax
purposes if either (i) 75% or more of our gross income in that taxable year is passive income or (ii) the average percentage of our assets
(which includes cash) in that taxable year which produce, or are held for the production of, passive income is at least 50%.
Based on the nature and composition of our income and assets, and the valuation of our assets, including goodwill, we do not believe
we were a PFIC for our 2022 taxable year. There is a risk, however, that we may become a PFIC in the current or any future taxable year
due to changes in our asset or income composition or in the value of our assets. In particular, the calculation of the value of our assets
will be based, in part, on the quarterly market value of our ADSs, which is subject to change and has been volatile. Any decrease in the
market value of our ADSs may result in our becoming a PFIC.

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If we are a PFIC for any taxable year during which you hold our ADSs or Class A ordinary shares, our PFIC status could result in
adverse U.S. federal income tax consequences to you if you are a U.S. Holder, as defined under “Item 10. Additional Information — E.
Taxation — Material U.S. Federal Income Tax Considerations.” For example, if we are or become a PFIC, you may become subject to
increased tax liabilities under U.S. federal income tax laws and regulations, and will become subject to burdensome reporting
requirements. See “Item 10. Additional Information — E. Taxation — Material U.S. Federal Income Tax Considerations — Passive
Foreign Investment Company.” There can be no assurance that we will not be a PFIC for our current or any future taxable year.
We will continue to incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging
growth company.”
Since the completion of our initial public offering, we have been a public company and expect to incur significant accounting, legal
and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, as well as rules subsequently implemented by
the SEC and the New York Stock Exchange, have detailed requirements concerning corporate governance practices of public companies,
including Section 404 of the Sarbanes-Oxley Act relating to internal controls over financial reporting. As a company with less than
US$1.07 billion in total annual gross revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS
Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise
applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404
of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting and
permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies. We will
take advantage of the extended transition period. As a result of this election, our financial statements may not be comparable to other
public companies that comply with the public company effective dates for these new or revised accounting standards.
We expect these and other rules and regulations applicable to public companies to increase our accounting, legal and financial
compliance costs and to make certain corporate activities more time-consuming and costly. We are evaluating and monitoring
developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the
timing of incurring such costs. After we are no longer an “emerging growth company,” we expect to incur significant expenses and
devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of
2002 and the other rules and regulations of the SEC. For example, as a result of being a public company, we need to increase the number
of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect that
operating as a public company makes it more difficult and more expensive for us to obtain director and officer liability insurance, and we
may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
In addition, we incurred additional costs associated with our public company reporting requirements. It may also be more difficult for us
to find qualified persons to serve on our board of directors or as executive officers. We are evaluating and monitoring developments with
respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we
may incur or the timing of such costs.
In the past, shareholders of a public company often brought securities class action suits against the company following periods of
instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount
of our management’s attention and other resources from our business and operations, which could harm our results of operations and
require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our
reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required
to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

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Our dual-class ordinary share structure with different voting rights could discourage others from pursuing any change of control
transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares are
entitled to one vote per share, while holders of Class B ordinary shares are entitled to three (3) votes per share on all matters subject to
vote at general meetings of the Company. Our existing shareholder GTI holds 56,589,300 Class A ordinary shares and all 34,762,909
Class B ordinary shares. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof,
and Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Due to the disparate voting rights
attached to shares in these two classes, GTI owns approximately 93.7% of the total voting power of our issued and outstanding ordinary
shares. Mr. Alex S. Xu, our founder, chairman and chief executive officer, by virtue of this 83.9% voting power of GTI, which entitles
Mr. Xu to nominate or replace all directors of GTI, and determine how GTI exercises the voting power in our company, is considered to
beneficially own the shares held by GTI. As a result, Mr. Xu has significant voting rights over matters requiring shareholders’ approval,
including the election and removal of directors and certain corporate transactions, such as mergers, consolidations and other business
combinations. This concentrated control could discourage others from pursuing any potential merger, takeover or other change of control
transactions that holders of Class A ordinary shares and ADSs may view as beneficial.
Holders of ADSs have fewer rights than shareholders and must act through the depositary to exercise their rights.
Holders of our ADSs do not have the same rights as our registered shareholders. As a holder of our ADSs, you will not have any
direct right to attend general meetings of our shareholders or to cast any votes at such meetings. You will only be able to exercise the
voting rights which attach to the underlying Class A ordinary shares represented by your ADSs indirectly by giving voting instructions to
the depositary in accordance with the provisions of the deposit agreement. Upon receipt of your voting instructions in a timely manner,
the depositary will vote or attempt to vote the underlying Class A ordinary shares represented by your ADSs in accordance with these
instructions. You will not be able to directly exercise your right to vote with respect to the underlying Class A ordinary shares represented
by your ADSs unless you withdraw such shares and become the registered holder of such shares prior to the record date for the general
meeting. Under our amended and restated memorandum and articles of association, the minimum notice period required to be given by
our company to our registered shareholders to convene a general meeting will be ten calendar days. When a general meeting is convened,
you may not receive sufficient notice of the meeting to enable you to withdraw the underlying Class A ordinary shares represented by
your ADSs and become the registered holder of such shares to allow you to attend the general meeting or to cast your vote directly with
respect to any specific matter or resolution to be considered and voted upon at the general meeting. In addition, under our amended and
restated memorandum and articles of association, for the purposes of determining those shareholders who are entitled to attend and vote
at any general meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such
closure of our register of members or the setting of such a record date may prevent you from withdrawing the underlying Class A
ordinary shares represented by your ADSs and becoming the registered holder of such shares prior to the record date, so that you would
not be able to attend the general meeting or to vote directly.
Under the deposit agreement, if we request the depositary to act at a general meeting, we will give the depositary notice of the
meeting at least 30 business days in advance of the meeting in order to give you a reasonable opportunity to instruct the depositary as to
the exercise of voting rights relating to underlying Class A ordinary shares represented by your ADSs. However, the depositary and its
agents may not be able to send voting instructions to you or carry out your voting instructions in a timely manner. Where any matter is to
be put to a vote at a general meeting, we will make all reasonable efforts to cause the depositary to notify you of the upcoming vote and
to deliver our voting materials to you in a timely manner, but we cannot assure you that you will receive the voting materials in time to
ensure that you can instruct the depositary to vote the underlying Class A ordinary shares represented by your ADSs. Furthermore, the
depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is
cast or for the effect of any such vote. As a result, you may not be able to exercise your right to direct how the underlying Class A
ordinary shares represented by your ADSs are voted and you may lack recourse if the underlying Class A ordinary shares represented by
your ADSs are not voted as you request. In addition, in your capacity as an ADS holder, you will not be able to call a shareholders’
meeting.

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42
ITEM 4.
INFORMATION ON THE COMPANY
A.
History and Development of the Company
We are a Cayman Islands holding company and conduct our operations in China through our PRC subsidiaries. GreenTree Inns
Hotel Management Group, Inc., a company incorporated in Samoa, or GreenTree Samoa, was formed to be a holding company and
currently holds most of the PRC Subsidiaries that operate our hotels in the PRC. GreenTree Samoa also owns 100% of the equity interest
in Pacific Hotel Investment, Inc. and GreenTree Suites Management Corp., each of which owns 100% of the equity interest in the other
two of our PRC subsidiaries.
We began our hotel business in the PRC in September 2004 through GreenTree Inns Hotel (Weihai) Management Group Inc., or
GreenTree Weihai, which was incorporated on November 14, 2003 and 100% owned by American Pacific Homes Inc., a company
wholly owned by Mr. Alex S. Xu, our founder, chairman and chief executive officer. In September 2010, GreenTree Weihai was merged
into GreenTree Samoa as a wholly-owned subsidiary of GreenTree Samoa. In October 2010, upon completion of a share exchange,
GreenTree Samoa became a wholly-owned subsidiary of GreenTree Inns Hotel Management Group, Inc., or GTI, a company
incorporated in the Cayman Islands.
GreenTree Hospitality Group Ltd., or GreenTree Hospitality, was incorporated in October 2017 as a wholly-owned subsidiary of
GTI. In November 2017, GreenTree Hospitality issued 48,635,251 Class A ordinary shares and 42,716,957 Class B ordinary shares to
GTI in exchange for the entire share capital of GreenTree Samoa then held by GTI. On March 11, 2018, we redesignated 7,954,048 of
our Class B ordinary shares as Class A ordinary shares. As of December 31, 2022, 83.9% of our Class A ordinary shares and 100% of
our Class B ordinary shares are owned by GTI, our parent company.
GTI intends to register and distribute to each of its shareholders not more than 60% of the number of our shares that represented
the percentage of such shareholder’s ownership in GTI as of March 29, 2018, the closing date of our initial public offering. As a
condition to receiving our shares, GTI’s shareholders were required to enter into lock-up agreements on all of our shares which they own,
and the number of our shares subject to such lock-up agreements was reduced by 25% at the end of each six month period following
March 26, 2018, the date of our initial public offering prospectus. Following the completion of our initial public offering and as long as
GTI or Mr. Alex S. Xu owns at least 50% of the voting power of our company, we are a “controlled company” as defined under the
NYSE Listed Company Manual. We have no current intention to rely on the controlled company exemption.
Deconsolidation of Argyle and Urban
In January 2019, we entered into a share purchase agreement to become a major shareholder of Argyle Hotel Group. Argyle is an
owner and operator of hotels, with a network of mid-scale and up-scale brands in China and Southeast Asia. This transaction was
completed in April 2019. We have been in a dispute with Mr. Kevin Zhang, the founder, and the minority shareholder of Argyle, as to
performance of relevant transaction documents and/or compliance with local laws and regulations by Mr. Zhang. As a result, since June
2022, we have not been able to maintain effective control over Argyle which therefore has been deconsolidated from our company.
In April 2019, we entered into an agreement to acquire a 70% equity stake in Urban. Urban is a franchised hotel operatior in China
with a network of economy and business brands. This transaction was completed in November of 2019. In November 2022, we and
Urban’s minority shareholder entered into definite agreements for the minority shareholder and its designated person to repurchase all of
the equity interest in Urban held by us. We no longer hold any equity interest in Urban and deconsolidated Urban from November 2022.
Acquisition of Da Niang Dumplings and Bellagio
In May 2022, we entered into a definitive agreement to acquire Da Niang Dumplings and Bellagio, two leading restaurant chain
businesses in China, or collectively, the Target Businesses, from GTI, our controlling shareholder. In March 2023, we closed and
completed the acquisition of the Target Businesses from GTI. GTI and its subsidiaries fully repaid all outstanding loan payables due to us
and our subsidiaries through offset against the purchase price paid by us, on a consolidated basis. The final transaction was completed
pursuant to the terms of the agreement, and the Target Businesses have been transferred from GTI to us.

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Da Niang Dumplings and Bellagio focus on offering healthy and affordable fast food and casual dining services to mass consumers
and generated a combined unaudited revenue of about RMB509 million in 2022. Since demand for such food services is more stable and
less dependent on discretionary spending as compared with our existing hotel services, we expect the Target Businesses to provide a
more stable revenue stream that may offset cyclical aspects of our hotel business. The restaurant and food businesses are also
complementary in nature as we witness increasing demand for hotel-related services in the local communities we serve, and we expect
cross-selling opportunities to arise from the two businesses. After completion of our proposed acquisition of Da Niang Dumplings and
Bellagio, we expect the Target Businesses and our existing business to share common resources, achieve economies of scale and improve
our overall operating performance. The proposed acquisition will also enable all of our shareholders to share in the synergistic growth of
the hotel and restaurant businesses.
Da Niang Dumplings
Da Niang Dumplings is a leading quick service restaurant chain in China, with restaurants covering 236 locations in 35 cities as of
December 31, 2022. As of December 31, 2022, the chain comprises of 99 self-operated restaurants and 137 franchised restaurants.
Bellagio
Bellagio is a leading casual dining restaurant chain focusing on the Chinese market, with restaurants covering 36 locations in more
than 14 cities as of December 31, 2022, including in mainland China, Macao and Southeast Asia. As of December 31, 2022, the chain
comprises of 27 self-operated restaurants and 9 franchised restaurants.
Both Da Niang Dumplings and Bellagio are committed to food quality and safety. They have implemented quality control measures
that standardize food quality and safety in their supply chain and restaurants.
Recent Developments
With the passing of the epidemic and the recovery of the industry, we are focusing on fast recovering the Revpar of single room and
continuously expanding the network of hotels. We will further penetrate into the Mid-to-Up-Scale segment, consolidate our advantages
in tier 3 and lower cities, and accelerate the expansion of hotels in the central, southeast, and southwest markets of China.
As of the end of 2022, 25.6% of hotels in our current pipeline were Mid-to-Up-Scale brands. Of our total hotel portfolio, 10.5%
were in the Mid-to-Up-Scale segment, which has been growing for 5 consecutive years. We plan to continue increasing the proportion of
Mid-to-Up-Scale hotels to 20% -25%. During 2021 and 2022, 18 of our newly opened 35 L&O hotels were Mid-to-Up-Scale hotels, all
located near transportation hubs, central business districts, or government centers in tier 1 and tier 2 cities. We have a vast growth space
in the Mid-to-Up-Scale segment of market, and we will further capitalize on the substantial opportunities in these areas. The combination
of our existing footprint and our strong performance in this segment provides us with a true competitive advantage in seizing future
opportunities in China’s booming hospitality industry.
On the other hand, we will continue to consolidate our advantages in tier 3 and lower cities. In the past three years, the recovery rate
of hotel Revpar in tier 3 and lower cities was faster than tier 1 and tier 2 cities. Our business in such cities was much more resilient under
the impact of Covid than other cities. Local guests have contributed to the recovery of hotels in tier 3 and lower cities. With the recovery
of the economy, short-distance business guests and surrounding tourism guests will continue to drive the growth of hotel Revpar in tier 3
and lower cities. As of the end of 2022, 72.6% of hotels in our current pipeline were located in tier 3 and lower cities, which has been the
highest proportion during the past 5 years. Of our total hotel portfolio, 68.2% were located in tier 3 and lower cities, which has been
growing for 5 consecutive years. We plan to stabilize this proportion at 65% -70%.
Furthermore, we have accelerated our expansion into China’s central, southeast and southwest markets. The newly opened L&O
hotels during 2021 and 2022 were mainly distributed in Chongqing, Sichuan, Hubei, Jiangxi, Guangxi, and Fujian. By promoting our
performance in local L&O hotels, we plan to accelerate the expansion of franchise hotels in the central, southeastern, and southwestern
markets of China.

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Regarding the recovery of Revpar, there were signs of recovery in the first quarter of 2023, reaching 94% of the same period level in
2019. Revpar recovery slowed again during the first half of January due to the rapid evolvement of pandemic after pandemic control
measures were lifted in China. However, it recovered to around 90% of its pre-pandemic levels over the Chinese New Year thanks to
family reunions. During this festival, according to the Ministry of Culture and Tourism, the number of tourists recovered to 88.6% and
domestic tourism revenues recovered to 73.1% of the levels in the same period of 2019. Such a recovery continued to increase in
February, exceeding the level of 2019, however, it pulled back a little bit in March due to outbreaks of influenza A in certain cities.
Again, after entering April, Revpar has recovered to over 95% of 2019 level.
In 2022, we were focusing on optimizing our management and operating systems, including design, technology features, sales, and
marketing programs, to improve hotel quality and operating performance. Our ongoing efforts in researching and testing various
decoration materials allow us to deploy cost effective materials that also ensure quality and excellent customer experience. In 2022, as
for the IT process, we are investing in information technology innovations and creating smarter hotels. We are an early mover in our
industry in upgrading our hotels to an integrated cloud-based management and AI-driven platform. We strongly believe that this is a solid
foundation that we need to advance to help ensuring that personal data is securely managed in a manner compliant with applicable
privacy laws and regulations. We are fully focused on developing smart and digital hotels to improve operational efficiency for our hotel
general managers and staff, ensure the reliability of our booking systems, and deliver excellent customer service.
Principal Offices
Our principal executive offices are located at 1228 Zhongshan North Road, Putuo District, Shanghai 200065, People’s Republic of
China. Our telephone number at this address is +86-21-3617-4886. Our registered office in the Cayman Islands is located at the offices of
Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands. Our agent for service of
process in the United States is Law Debenture Corporate Services Inc., located at 801 2nd Avenue, Suite 403, New York, New York
10017.
B.
Business Overview
We have the strong direct sales channels coupled with an established membership program. We achieved more than 95.0% of
franchised-and-managed hotels in our hotel network as early as 2013, and currently operate with 98.5% of franchised-and-managed
hotels in our network. Our pure play franchised model allows us to expand rapidly in an asset-light manner and have brought us
substantial financial performance in terms of profitability, return on investments and success to its franchisees.
As of December 31, 2022, our nationwide hotel network consisted of 4,059 hotels with 302,497 rooms in China, covering all four
centrally-administrated municipalities and 355 cities throughout all 31 provinces and autonomous regions in China, as well as an
additional 916 hotels that were contracted for or under development. We operate one of the fastest growing hotel networks in China –
from 2012 to 2022, we grew from 792 to 4,059 hotels at a CAGR of 17.8%. Rooted in China’s hospitality market with the largest
addressable market, we are well positioned as a market leader to capture the robust momentum in China’s economic growth and growing
consumer demand for value-for-money options. Our strong presence in China’s thriving Tier 3 and lower cities also presents substantial
expansion opportunities for a market leader like us to capture the growth opportunities in China’s booming hospitality industry and
further enhance our profitability.
Brands have paved the way for our continuous success. We have built a strong suite of well-recognized and diversified brands, each
with unique attributes and strengths to appeal to different consumer segments and franchisee needs, enabling us to capture a wide
spectrum of market opportunities. We started as an operator of mid-scale market brands – our first and flagship brand, GreenTree Inns,
caters to the needs of value-conscious business travelers and leisure travelers. Over the past 16 years, GreenTree Inns has grown into a
beloved Chinese household name that is synonymous with comfort, high quality and affordability. Through organic development and
acquisitions, we have since successfully rolled out a number of brands in the business, mid-to-up-scale and economy to mid-scale market
segments to capture the growth opportunities along the industry value chain. Today, our brand portfolio has grown to comprise more than
20 brands, including (i) mid-to-up-scale brands including GreenTree Eastern founded in 2012, Gem, Gya and Vx brands founded in
2017, Deep Sleep Hotel, which was adopted from one of our franchisees in 2018, (ii) mid brands including GreenTree Inns founded in
2004, GT Alliance founded in 2008, Vatica founded in 2013, GreenTree Apartment founded in 2018, Geli founded in 2021; and (iii)
economy brands including Shell founded in 2016.
Over the years, we have successfully forged an all-win ecosystem for our franchisees, guests and employees through a highly
effective and scalable franchise management system, a set of strong direct sales channels coupled with an established membership
program and a suite of state-of-the-art technologies and tools optimizing hotel operations and enhancing guest experiences.

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●
A highly effective and scalable franchise management system, which empowers our franchisees and enables us to grow rapidly.
This system effectively manages the full life cycle of a franchised hotel with a high degree of standardization, and ensures
quality service to be consistently delivered to our guests. Through our franchise management system, we guide and hand-hold
our franchisees every step of the process, starting from new project initiation and planning, site selection, decoration,
procurement, hotel opening preparation, daily operation, quality inspection to hotel closure. Our strong and supportive franchise
system enables our franchisees to generate highly attractive investment returns, which we believe is both a strong attraction for
potential franchisees and a strong incentive for existing franchisees to open multiple hotels.
●
Strong direct sales channels coupled with an established membership program. We have successfully built up a set of strong
direct sales channels, and are able to sell a predominant proportion of our room night through our strong direct sales channels
comprising our website, mobile apps, WeChat mini-program and reservation functions embedded in a number of popular apps.
In 2022, we sold approximately 89.1% of our room nights through our direct sales channels, while OTAs contributed
approximately 10.9% of our room nights. We have also accumulated a vast base of loyal individual members and corporate
members. Our loyal individual members increased with a CAGR of approximately 36.9% from approximately 1.8 million
members as of December 31, 2010. As of December 31, 2022, we had approximately 1,935,000 corporate members and 78
million individual members, who have registered with us and enjoy a range of different benefits, including discounts on room
rates and priority in making hotel reservations. In 2020, 2021 and 2022, our corporate members and loyal members booked
75.1%, 72.9% and 75.2%, respectively, of room nights in our hotel network. Our strong direct sales channels, coupled with an
established membership program, effectively deliver large volumes of guests with reduced sales and marketing expenses and
enhance customer loyalty.
●
A suite of state-of-the-art technologies and tools. We have developed an industry-leading, proprietary technology infrastructure
that optimizes franchisee operations, enhances customer experience, increases our management efficiency, and supports our fast
growth. We have developed a series of tools/technologies to improve the efficiency of our internal operations, to support
franchisee/hotel level operations, and to improve guest satisfaction from booking until check-out.
Our Hotel Network
We provide guests at each of our different brands of hotels with conveniently-located, clean, comfortable and quality
accommodations at competitive prices. We cater primarily to the needs of value- and quality-conscious business travelers and leisure
travelers.
As of December 31, 2022, our overall hotel network consisted of 4,059 hotels with 302,497 rooms in operation covering 355 cities
in China, and an additional 916 hotels with 63,615 rooms that were contracted for or under development. Out of those 916 hotels, 649
hotels were contracted for, and the remaining 267 hotels were under development.

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The following map depicts the geographic coverage of our hotel network as of December 31, 2022.
We expand into a new city if it meets our selection criteria, especially potential for economic growth, geographic location and
affordability of long-term rent. First, as a result of one of our strategies to build a dense network of hotels in the most affluent regions in
China with high growth potential, 45.4% of our hotels were located in the Greater Yangtze River Delta region, while 9.8% of our hotels
were located in Beijing/Tianjin/Hebei province as of December 31, 2022. Within these regions, we select locations to achieve a balanced
rental rate and RevPAR, thereby ensuring attractive returns for our franchisees. Secondly, we continuously penetrated into Tier 3 and
lower cities to capture the robust growth and growing consumer demand. As of December 31, 2022, 409 of our 4,059 hotels were located
in Tier 1 cities (10.1%), 881 in Tier 2 cities (21.7%) and 2,769 in other cities (68.2%). Taking into account of the hotels under
development as of the same date, by December 31, 2022, the number of our hotels located in Tier 3 cities and lower cities will further
increase to 2,954 representing 68.3% of our total hotels in operation and under development. Furthermore, we will accelerate our
expansion into the mid-scale to business and mid-to-up-scale markets in central China, southeast China and southwest China. We will put
additional effort and build up flagship hotels for Tier 1 and Tier 2 cities with strategic positions around transportation hubs, central
business districts, or government centers in Tier 1 and Tier 2 cities.

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The following table sets forth a breakdown by geographic locations of our hotels as of December 31, 2022.
Contracted
for or under
Development
Contracted
Franchised-
Leased-and-
Franchised-
Leased-and-
and-managed
operated
and- managed
Operated
City
    
Hotels
    
Hotels
    
Hotels
    
Hotels
    
Total
Shanghai Municipality and 61 cities in Jiangsu, Zhejiang and Anhui
Provinces
 
 1,813  
 30  
 345  
 3    2,191
Beijing, Tianjin Municipalities and Hebei Province
 
 395  
 4  
 82  
 —  
 481
Other cities
 
 1,790  
 27  
 483  
 3    2,303
The following table sets forth a breakdown of locations of our hotels by Tier 1, Tier 2, Tier 3 and lower cities as of December 31,
2022.
Contracted
for or under
Development
Contracted
Franchised-
Leased-and-
Franchised-
Leased-and-
and-managed
operated
and- managed
Operated
City
    
Hotels
    
Hotels
    
Hotels
    
Hotels
    
Total
Tier 1 cities
 
 390  
 19  
 45  
 1  
 455
Tier 2 cities
 
 852  
 29  
 207  
 1    1,089
Tier 3 and lower cities
 
 2,756  
 13  
 658  
 4    3,431
Total
 
 3,998  
 61  
 910  
 6    4,975

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48
The following table sets forth a breakdown of the number of our hotels in operation by operational model as of December 31, 2022.
    
    
    
    
    
    
    
    
    
    
Number of
Number of
Average
Total
Hotels Opened
Hotels Opened
Number of
Typical
Number of
for Over Six
for Less than
Rooms per
Lease/Franchise
    
Hotels
    
Months
    
Six Months     
Hotel
    
Term
Franchised-and-managed hotels
 
   
   
   
   
  
GreenTree Eastern
 
 204  
 197  
 7  
 105  
10 – 20 years
Gem
 
 48  
 46  
 2  
 88  
10 – 20 years
Gya
 
 64  
 63  
 1  
 85  
10 – 20 years
Vx
 
 79  
 76  
 3  
 84  
10 – 20 years
Deep Sleep Hotel (无眠酒店)
 
 4  
 4  
 —  
 71  
10 – 20 years
GreenTree Inn
 
 2,261  
 2,195  
 66  
 82  
10 – 20 years
GT Alliance
 
 529  
 508  
 21  
 71  
10 – 20 years
GreenTree Apartment
 
 18  
 18  
 —  
 64  
10 – 20 years
Vatica
 
 111  
 110  
 1  
 72  
10 – 20 years
Shell
 
 680  
 648  
 32  
 43  
5 years
Leased-and-operated hotels
 
   
   
   
   
  
GreenTree Eastern
 
 9  
 8  
 1  
 150  
10 – 20 years
Gem
 
 5  
 5  
 —  
 108  
10 – 20 years
Gya
 
 4  
 3  
 1  
 100  
10 – 20 years
Vx
 
 6  
 5  
 1  
 123  
10 – 20 years
Deep Sleep Hotel (无眠酒店)
 
 3  
 3  
 —  
 83  
10 – 20 years
GreenTree Inn
 
 24  
 24  
 —  
 129  
10 – 20 years
GT Alliance
 
 9  
 9  
 —  
 81  
10 – 20 years
GreenTree Apartment
 
 1  
 1  
 —  
 107  
10 – 20 years
Franchised-and-managed hotels. As of December 31, 2022, we had 3,998 franchised-and-managed hotels, accounting for 98.5% of
all of our hotels in operation. For our franchised-and-managed hotels, we license our relevant brand to property owners, lessors or
existing hotel operators who become our franchisees, and we give the franchisees the right to use our brand name, logo, operating
manuals and procedures. We generate revenue from collecting an initial franchise fee and a percentage of revenue in each period without
franchisees’ loss. Hotels under the franchised-and-managed business model will be converted in accordance with our brand standard,
including conforming the hotel property to the standard design and layout of the corresponding brand offering under our supervision,
becoming integrated into our central reservation system and hotel management IT system, being staffed with well-trained general
managers and other managerial personnel and being included in our consumable goods procurement system. This conversion progress
ensures our ability to provide services of consistent quality to our hotel guests.
Our franchisees are responsible for the costs of developing and operating their hotels, including the costs of renovating the hotels to
meet our standards. We believe that the franchised-and-managed model has enabled us to expand our geographical coverage and market
share quickly and effectively with less capital and lower upfront investment. We leverage the local knowledge and relationships of our
franchisees in order to achieve success, while dedicating resources to help them achieve good investment returns.
We aim to strengthen our leadership position and gain greater market share by attracting new franchisees while encouraging our
existing franchisees to expand their hotel business under our brand and management.

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49
Franchise Agreements and Cost Structure. Our franchise agreements typically carry terms of 10 to 20 years. Under our typical
franchise agreements, the franchisee is required to pay an initial one-time franchise fee of RMB150,000 to RMB250,000, depending on
the size of the property, a one-time system installation fee and a one-time project consultancy fee, and recurring monthly franchise
management fees of 3% to 5% of total revenue, which primarily consist of ongoing management and service fees based on a
certain percentage of room revenues, as well as system maintenance, reservation fees to use our central reservation system and other
support fees, including marketing fees to cover expenses associated with marketing and media advertising. The initial fee and ongoing
franchise management fee are intended to cover our operating expenses, such as expenses incurred for purposes of business
development, quality assurance, administrative support and other franchise services and to provide us with operating profits. Pursuant to
the typical franchise agreement, we are entitled to terminate the franchise under a number of circumstances, including: franchisee
insolvency or bankruptcy; falsification of revenue by the franchisee; and unapproved transfer of the property by the franchisee. We may
also terminate a franchise agreement where the franchisee fails to cure any of the following conditions within 30 days: failure to make
necessary repairs; failure to maintain required insurance; operation of the hotel in violation of applicable laws and regulations; and
failure to pass periodic inspections made by us. Franchisees generally have the right to terminate the franchise agreement in the event of
our default in performing our obligations under the franchise agreement.
The fee and cost structure of our franchised-and-managed business model afford us opportunities to improve operating results by
increasing the number of franchised-and-managed hotel rooms, improving RevPAR performance and increasing the effective franchise
management fee rates of our franchise agreements. As a hotel franchisor, we derive our revenue primarily from the various franchise fees
described above.
Our revenue stream depends on the number of rooms in our franchise, revenues generated by our franchisees and effective franchise
management fee rates under our franchise agreements. We enjoy significant operating leverage by using smart IT systems and effective
organizational management structures, since the variable operating costs associated with our franchise growth have historically been less
than incremental franchise management fees generated from new franchisees.
Leased-and-operated Hotels. As of December 31, 2022, we had 61 leased-and-operated hotels, accounting for 1.5% of all of our
hotels then in operation. For all but four of our leased-and-operated hotels, we lease properties from property owners or lessors and we
are responsible for all costs of construction, ongoing maintenance and repairs in connection with converting the property to conform to
the standards of our brands and all hotel operating expenses. Rent is generally paid on a quarterly or semiannual basis. Our typical lease
term ranges from 10 to 20 years with an initial three- to six-month rent-free period. Upon a lease’s expiry, we generally have the right to
remove and dispose of any removable facilities, equipment and appliances, while leasehold improvements and fixtures will be kept by
the real estate owner or lessor. Our leases typically contain a penalty for early termination that is equal to double the daily rent times the
number of days remaining on the lease. In addition, our lessors are typically required to notify us in advance if they intend to sell or
dispose of the subject property, in which case we have a preemptive right to purchase the property on conditions and terms equivalent to
those being offered by the lessor.

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50
Hotel Performance
The following table presents certain selected operating data as of and for the dates and periods indicated. Our revenues have been
and will continue to be significantly affected by these operating measures which are widely used in the hospitality industry.
    
    As of December 31,
    
2020
    
2021
    
2022
Total hotels in operation:
  
  
  
Franchised-and-managed hotels
 4,300
 4,593
 3,998
Argyle
 23
 33
 —
GreenTree Eastern
 146
 196
 204
Gem
 33
 43
 48
Gya
 40
 59
 64
Vx
 33
 74
 79
Deep Sleep Hotel
 2
 4
 4
Ausotel
 11
 16
 —
Urban Garden and others*
 79
 99
 —
GreenTree Inns
 2,143
 2,145
 2,261
GT Alliance
 374
 506
 529
GreenTree Apartment
 12
 15
 18
Vatica
 121
 112
 111
City 118 Selected and others*
 115
 120
 —
Shell
 620
 650
 680
City 118 and others*
 548
 521
 —
Leased-and-operated hotels
 40
 66
 61
GreenTree Eastern
 5
 8
 9
Gem
 2
 3
 5
Gya
 2
 3
 4
Vx
 —
 5
 6 
Deep Sleep Hotel
 1
 2
 3
Ausotel
 2
 2
 —
Urban Garden and others*
 4
 5
 —
GreenTree Inns
 20
 24
 24
GT Alliance
 —
 9
 9
GreenTree Apartment
 1
 1
 1
City 118 and others*
 3
 4
 —
Total
 4,340
 4,659
 4,059
Total rooms:
  
  
  
Franchised-and-managed hotels
 310,447
 330,089
 295,932
Argyle
 4,749
 6,265.0
  
GreenTree Eastern
 14,888
 21,030
 21,402
Gem
 2,944
 3,837
 4,212
Gya
 3,334
 4,984
 5,413
Vx
 2,681
 6,484
 6,666
Deep Sleep Hotel
 159
 285
 285
Ausotel
 1,386
 1,957
 —
Urban Garden and others*
 4,915
 5,760
 —
GreenTree Inns
 178,922
 176,340
 182,084
GT Alliance
 28,560
 36,095.0
 37,299
GreenTree Apartment
 755
 991
 1,155
Vatica
 8,749
 8,115
 8,009
City 118 Selected and others*
 5,603
 5,886
 —
Shell
 26,784
 28,196
 29,407
City 118 and others*
 25,984
 23,864
 —
Leased-and-operated hotels
 4,888
 7,064
 6,565
GreenTree Eastern
 731
 1,216
 1,352
Gem
 258
 132
 541
Gya
 238
 336
 398
VX
 —
 318
 737
Deep Sleep Hotel
 62
 537
 249
Ausotel
 280
 537
 —
Urban Garden and others*
 427
 280
 —
GreenTree Inns
 2,373
 510
 2,449
GT Alliance
 —
 707
 732
GreenTree Apartment
 107
 107
 107
City 118 and others*
 412
 412
 —
Total
 315,335
 337,153
 302,497

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51
.
For the Year Ended December 31,
    
2020
    
2021
    
2022
Occupancy rate (as a percentage)(1)
Franchised-and-managed hotels
 
 68.9 %  
 71.3 %  
 63.8 %
Argyle
 
 38.3 %  
 37.7 %  
 — %
GreenTree Eastern
 
 68.5 %  
 69.2 %  
 63.0 %
Gem
 
 64.9 %  
 64.0 %  
 59.8 %
Gya
 
 66.6 %  
 71.0 %  
 63.2 %
Vx
 
 68.4 %  
 67.9 %  
 61.9 %
Deep Sleep Hotel
 
 44.7 %  
 55.1 %  
 62.4 %
Ausotel
 
 44.7 %  
 48.6 %  
 — %
Urban Garden and others*
 
 50.6 %  
 54.8 %  
 48.5 %
GreenTree Inns
 
 73.7 %  
 76.4 %  
 67.0 %
GT Alliance
 
 66.1 %  
 70.0 %  
 62.9 %
GreenTree Apartment
 
 50.8 %  
 48.4 %  
 40.6 %
Vatica
 
 70.8 %  
 73.5 %  
 65.4 %
City 118 Selected and others*
 
 54.5 %  
 58.2 %  
 44.8 %
Shell
 
 71.6 %  
 74.8 %  
 66.9 %
City 118 and others*
 
 46.3 %  
 48.8 %  
 41.6 %
Leased-and-operated hotels
 
 57.8 %  
 63.4 %  
 58.4 %
GreenTree Eastern
 
 48.1 %  
 53.3 %  
 55.4 %
Gem
 
 57.8 %  
 66.9 %  
 58.8 %
Gya
 
 55.8 %  
 66.3 %  
 63.9 %
Vx
 
 — %  
 62.1 %  
61.7 %
Deep Sleep Hotel
 
 65.8 %  
 61.7 %  
 63.9 %
Ausotel
 
 72.1 %  
 58.6 %  
 — %
Urban Garden and others*
 
 51.9 %  
 52.0 %  
 50.8 %
GreenTree Inns
 
 60.6 %  
 70.9 %  
 61.5 %
GT Alliance
 
 — %  
 66.1 %  
51.8 %
GreenTree Apartment
 
 71.8 %  
 89.5 %  
 59.4 %
City 118 and others*
 
 55.8 %  
 51.2 %  
 51.2 %
Total hotels in operation
 
 68.7 %  
 71.1 %  
 63.7 %
Average daily rate (in RMB)
Franchised-and-managed hotels
 
 152  
 163  
 157
Argyle
 
 239  
 278  
 —
GreenTree Eastern
 
 195  
 209  
 208
Gem
 
 180  
 192  
 191
Gya
 
 195  
 203  
 195
Vx
 
 175  
 190  
 186
Deep Sleep Hotel
 
 168  
 225  
 202
Ausotel
 
 287  
 322  
 —
Urban Garden and others*
 
 161  
 165  
 162
GreenTree Inns
 
 152  
 163  
 158
GT Alliance
 
 148  
 146  
 151
GreenTree Apartment
 
 149  
 127  
 97
Vatica
 
 144  
 153  
 147
City 118 Selected and others*
 
 133  
 139  
 130
Shell
 
 129  
 137  
 131
City 118 and others*
 
 123  
 128  
 123
Leased-and-operated hotels
 
 179  
 213  
 219
GreenTree Eastern
 
 216  
 247  
 229
Gem
 
 197  
 245  
 250
Gya
 
 220  
 262  
 362
Vx
 
 —  
 272
246
Deep Sleep Hotel
 
 237  
 272  
 244
Ausotel
 
 259  
 225  
 —
Urban Garden and others*
 
 214  
 264  
 212
GreenTree Inns
 
 171  
 223  
 196
GT Alliance
 
 —  
 189
161
GreenTree Apartment
 
 71  
 113  
 113
City 118 and others*
 
 121  
 141  
 154
Total hotels in operation
 
 152  
 164  
 159
RevPAR (in RMB)
Franchised-and-managed hotels
 105  
 116  
 100
Argyle
 91  
 105  
 —
GreenTree Eastern
 134  
 145  
 131
Gem
 117  
 123  
 114
Gya
 130  
 144  
 123
Vx
 119  
 129  
 115
Deep Sleep Hotel
 75  
 124  
 126
Ausotel
 128  
 157  
 —
Urban Garden and others*
 82  
 91  
 79
GreenTree Inns
 112  
 125  
 106
GT Alliance
 97  
 102  
 95
GreenTree Apartment
76  
 62
 39
Vatica
102  
 112
 96
City 118 Selected and others*
73  
 81
 58
Shell
93  
 103
 88
City 118 and others*
57  
 63
 51
Leased-and-operated hotels
104  
 135
 128
GreenTree Eastern
104  
 131
 127
Gem
114  
 164
 147
Gya
123  
 173
 231
Vx
 —
 169
152
Deep Sleep Hotel
156  
 139
 156
Ausotel
187  
 155
 —
Urban Garden and others*
111  
 116
 108
GreenTree Inns
104  
 137
 120
GT Alliance
 —
 125
83
GreenTree Apartment
51  
 101
 67
City 118 and others*
68  
 72
 69
Total hotels in operation
105  
 116
 101
(1)
Based on number of available rooms.

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52
Our Brands
Number of hotels
contracted for
Number of hotels
or under
in operation
development
as of
as of
December 31,
December 31,
    
Brands
    
2022
    
2022
Business to Mid-to-up-scale
  GreenTree Eastern
 
 213  
 109
  Gem, Gya and Vx
 
 206  
 116
  Deep Sleep Hotel
 
 7  
 4
Mid-scale
  GreenTree Inns
 
 2,285  
 373
  GT Alliance
 
 538  
 73
  GreenTree Apartment  
 19  
 31
  Vatica
 
 111  
 15
Economy
  Shell
 
 680  
 195
Total
 
   
 4,059  
 916
We launched the current business of operating and managing a multi-brand hotel group in 2004. Our main brand, GreenTree Inns,
caters to the needs of value-conscious business travelers and leisure travelers. We also offer GT Alliance hotels that feature distinctive
designs and furnishings from our GreenTree Inns brand. We launched our GreenTree Eastern brand as our first hotel offering designed to
provide a level of service commensurate with four-star hotels for quality-conscious business travelers at mid-to-up-scale price points.
Our mid-scale brand Vatica and economy brand Shell offer vibrant accommodations suited to young professionals and travelers. We have
expanded our brand portfolio in the mid-to-up-scale segment, with Gem, Gya and Vx brands launched in 2017 and Deep Sleep brand in
2018, which complement the diversity and style of our hospitality offerings. During the second half year of 2018, we started our
GreenTree apartment business.
GreenTree Eastern. Founded in 2012, our GreenTree Eastern brand of premium boutique hotels that are designed to provide a level
of service commensurate with four-star hotels to quality-conscious business travelers at mid-to-up-scale price points. GreenTree Eastern
hotels are generally located in busy commercial centers and urban high-tech zones, and are priced between RMB300 and RMB600 per
room night. These hotels feature more customized room layouts, stylish working spaces and healthy dining as well as beauty and health
spas.
Gem. Founded in 2017, our Gem brand of hotels are mid-to-up-scale business hotels that are designed to be a calm and unique
heaven for business travelers. “Go with Me”, the Gem brand takes business travelers to a space with rich culture and graceful taste. Our
Gem branded hotels are priced between RMB280 and RMB350 per room night.
Gya. Founded in 2017, our Gya brand of hotels are mid-to-up-scale smart, fashionable and trendy hotels that are designed to be a
chic club that highlights individuality. A rendezvous with Gya hotels take travelers to a spiritual sanctuary in the busy world. Our Gya
branded hotels are priced between RMB280 and RMB350 per room night.
Vx. Founded in 2017, our Vx brand of hotels are mid-to-up-scale leisure hotels that combine youthful trends with artistic interiors to
allow each hotel to make a mark on the local culture scene. The colorful lobbies and artistic designs create a “Very Relaxing” space for
travelers at our Vx brand of hotels. Our Vx branded hotels are priced between RMB280 and RMB350 per room night.
Deep Sleep. Adopted from one of our franchisees in 2018, our Deep Sleep branded hotel is a mid-to-up-scale hotel that provides
comfortable, intimate, simple and stylish spaces to business travelers for “a deep sleep.” Our Deep Sleep branded hotel is priced between
RMB270 and RMB400 per room night.
GreenTree Inns. Founded in 2004 with our first hotel opened in Shanghai, GreenTree Inns is designed to provide a level of service
commensurate with three-star hotels and value to business and leisure travelers at mid-scale price points. These hotels are typically
located in areas close to major business and commercial districts, and are priced between RMB180 and RMB400 per room night. These
hotels feature spacious lobbies and our uniform GreenTree Inns decorative style, and provide free high-speed Internet access, cable
television, conference rooms, business centers and exercise facilities. Most of our GreenTree Inns hotels provide food and beverage
through onsite restaurants.

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53
GT Alliance. Founded in 2008, our GT Alliance brand offers unique hotels in desirable locations to deliver individualized
experiences with distinctive decor and furnishings for our guests. GT Alliance hotels are typically designed to provide a level of service
commensurate with three-star hotels, and are priced between RMB150 and RMB400 per room night. We provide GT Alliance branded
hotels with our standard operating procedures and proprietary Property Management System to help ensure a uniform quality of services
for our guests. Most of the GT Alliance hotels provide food and beverage through onsite restaurants.
GreenTree Apartment. Founded in 2018, our GreenTree Apartment is committed to providing medium and long term apartment
rental service for new urbanites, and expanding into the market with midscale economic products. GreenTree Apartments are priced at
more than RMB150 per room night.
Vatica. Founded in 2013, our Vatica brand of hotels offer oases of natural, environmentally conscious design elements in urban
settings to provide vibrant experiences for white-collar professionals and allow them to retreat to nature while in the heart of the city.
Vatica hotels are priced between RMB150 and RMB300 per room night. Vatica hotels promote green, environmentally-friendly and low-
carbon lifestyles with neat accommodations. These hotels feature modern, well-appointed rooms and amenities with free 24-hour Internet
access.
Shell. Founded in 2016, our Shell brand of hotels mixes fashionable designs and creative elements to host young professionals,
travelers and college students while in major urban centers along their journey. Shell branded hotels are gaining popularity among youths
in urban areas, and are priced between RMB99 and RMB260 per room night.
Membership Program
Our GreenTree Reward Membership Program is a key element of our marketing efforts. We invite our guests to participate in this
customer loyalty program.
We have four tiers of membership — e-membership, regular membership, gold membership and platinum membership. Other than
basic-tier e-membership, a one-time membership fee is charged to join one of our three premium tiers of regular, gold or platinum
membership, for which we charge a fee of RMB36, RMB198 and RMB398, respectively. Each membership must be used at least once
during the period of two years following its last use, or the membership will expire.
Different tiers of membership offer different benefits. Individual members and corporate members enjoy a range of different
benefits, including discounts on room rates, priority in making hotel reservations, and they accumulate membership points for their paid
stays. Membership points can be redeemed for membership upgrades, room night awards and other gifts and products. The estimated
incremental costs to provide gifts, membership upgrades and room night awards are accrued and recorded as selling and marketing
expenses in our consolidated statements of
As individual members and corporate members redeem awards or their entitlements expire, the provision is reduced
correspondingly. We record estimated liabilities for points that are expected to be redeemed in the future, by estimating points that will be
forfeited based on historical data.
We have accumulated a strong base of loyal hotel guests, including over 1,935,000 corporate members and approximately 78 million
individual members as of December 31, 2022. In 2020, 2021 and 2022, our corporate members and individual members book
approximately 75.1%, 72.9% and 75.2%, respectively, of room nights in our hotel network. In addition, approximately 68% of our
individual members are between the ages of 20 and 40, which represents the youthful core of our loyal guest community whose spending
power is expected to grow in years to come. The following table shows the breakdown of our membership by age:
        
Age Group
    
Age 21 to 30
 27 %
Age 31 to 40
 41 %
Age 41 to 50
 22 %
Others
 10 %

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54
Our loyal membership program increases membership retention rate, enhances members’ loyalty and commitment to our services
and encourages individual members and corporate members to repeatedly use our central reservation system as well as other membership
services, substantially keeping our low dependence on third party reservation channels. In 2022, we sold approximately 89.1% of our
room nights through our direct sales channels, while OTAs contributed approximately 10.9% of our room nights. The extensive network
of corporate members and individual members provides us with a stable base of repeat guests, which is in turn an attractive marketing
message to potential franchisees.
Hotel Development
We have adopted a systematic process with respect to the planning and execution of new development projects for our franchised-
and-managed and leased-and-operated hotels. When assessing potential franchising opportunities, we consider and evaluate factors such
as the quality of the prospective franchisee and consistency with our standards. The franchise agreement must be based on our standard
form and is processed through the same internal review procedure as our lease agreements.
Market and Hotel Selection Criteria
We seek franchised-and-managed or leased-and-operated properties that meet the following general market and specific hotel
criteria:
General Market Criteria. We follow a return-driven approach in selecting hotel locations. We focus on cities that are approaching, or
have already entered into, periods of significant economic growth. Such cities generally show growth in certain business segments as
measured by employment opportunities, population growth rates, tourism and convention activities, air traffic volume, local commercial
real estate occupancy, and retail sales volume. Cities that exhibit growth in these areas typically have strong demand for hotel facilities
and services. Cities which we target include provincial capitals, national economic centers, special economic zones, urban tourist
destinations and regional transportation hubs. As a result of one of our strategies to build a dense network of hotels in the most affluent
region in China with high growth potential, 45.4% of our hotels were located in the Greater Yangtze River Delta region, while 9.8% of
our hotels were located in Beijing/Tianjin/Hebei region as of December 31, 2022. Meanwhile, as China continues to develop its high-
speed rail networks and more enterprises move from coastal cities to inland cities, we are placing greater emphasis on expanding our
operations in Tier 3 and lower cities. We select locations that will help us achieve a balanced rental rate and RevPAR, many of which are
located in Tier 3 and lower cities, thereby ensuring more attractive returns for our franchisees. Furthermore, we will accelerate our
expansion into the mid-scale to business and mid-to-up-scale markets in Tier 1 and Tier 2 cities, where we also follow this return-driven
approach.
Specific Hotel Criteria. We seek to invest in hotels that are conveniently located near entertainment, shopping, commercial,
conference or tourist centers, universities, and mid-to-high-end residential areas. We also consider a hotel’s proximity to local businesses,
such as restaurants, banks, convenience stores, supermarkets and malls. Transportation is another factor we consider, and we actively
seek properties situated near major public transit, major thoroughfares or intersections and airports. We believe that having our hotels
located near both business and leisure centers enables us to attract both weekday business travelers and weekend leisure travelers. We
prefer certain building features including stand-alone structures having a gross floor area of between 3,000 and 8,000 square meters,
elevators, standard water, electricity and telecommunications connections, and sufficient surrounding space to provide one parking space
for every three to five hotel rooms. We seek to develop and operate a full range of hotels, most of which have 80 to 120 guest rooms,
which include amenities such as a cafe, self-service laundry facilities, business center and conference rooms that are attractive to key
demand segments such as individual business and leisure travelers. We balance location, demand, property pricing and rent to ensure low
operating leverage ratio that enables attractive and sustainable returns to be achieved by the hotels.
For our leased-and-operated hotels, we require our development team and operations team to assess the potential financial return of
every proposed new hotel. We typically only develop hotels that exhibit a potential for achieving our internal financial return objectives
both in the near term and over the term of the lease agreement.
Hotel Development Team. Our hotel development team consisted of 140 members as of December 31, 2022, many of whom have
over two years of experience in real estate development and construction. As of the same date, our hotel development team was led by 33
managers. Each regional manager has in-depth knowledge of the target markets in the specific region, and draws on local knowledge to
supervise the identification, evaluation and selection of suitable hotel properties by our business development employees.

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55
Franchised-and-Managed Hotel Development. For our franchised-and-managed hotels, we conduct research and evaluation both
on the hotel properties and on the qualifications of the potential franchisees. The hotel property research criteria and procedures are the
same for our franchised-and-managed model and our leased-and-operated model. When evaluating a prospective franchisee, we review
the franchisee’s financial records, credit history, indebtedness and capitalization in order to ensure that the franchisee has sufficient
resources to complete the property conversion and develop the hotel to a fully operational status. We provide franchisees with our
detailed design and construction manual. We generally supervise the construction process and offer cost-savings suggestions. These
measures assist franchisees in refurbishing, renovating or constructing their properties after they join our brands and help them meet our
brand specifications. Before construction is completed, we carry out a series of pre-opening activities, such as inspecting the quality of
the converted property, identifying and appointing the general manager and other members of the hotel management team, and training
hotel staff in anticipation of the hotel’s opening. After a franchise agreement is executed, it typically takes between five and 12 months to
open the subject hotel for business. Our business development team actively participates in local hotel associations and industry
conferences to expand our network, to become more familiar with local markets and explore cooperation opportunities with potential
franchisees. We also attract potential franchisees through word-of-mouth referrals made by our existing franchisees, our marketing
efforts, and the experience of guests satisfied with our quality service.
Leased-and-Operated Hotel Development. While we focus on operating hotels under our franchised-and-managed model, when we
identify appropriate opportunities, we also directly operate selected hotels under our leased-and-operated model. Our development team
follows a structured and systematic process to evaluate, select and renovate properties for our branded hotels. This process begins with a
study of the suitability of a prospective new market, as applicable, in terms of economic conditions, demographics, transportation
infrastructure, city planning and development, and the availability of existing hotel accommodations. After deciding to pursue
opportunities in a particular city, our regional development team commences a search of attractive properties within that market, taking
into consideration a variety of factors, including convenience of location and proximity to major business and leisure centers. In
evaluating a potential site, our business development team conducts an interview with the property owner, gathers information about the
property, conducts a site visit, takes pictures and prepares a preliminary report for the regional manager to assess the suitability of the
location. If a site passes this initial review process, our engineering department then carefully reviews blueprints, the layout and design of
the property, and prepares a conversion plan. Our legal department reviews any permits, authorizations, certificates, title documents,
lease agreements, mortgages or other legal documentation, as applicable, and assesses any legal risk. Our operations department conducts
further site visits to further assess the commercial viability of the location. Our business development team then presents a final report to
the regional manager which includes a financial forecast and construction budget. If the final report is approved by the regional manager,
our chief executive officer will review the report and make a final decision. If our chief executive officer decides to proceed, then we
enter into a memorandum of understanding with the prospective property owner and proceed to negotiate the details of the final lease
agreement, which also is subject to comments and approval by our engineering, legal and operations departments.
Hotel Management
Our management team has accumulated significant experience with respect to the operation of economy hotels, mid-scale hotels as
well as mid-to-up-scale hotels. Building on this experience, our management team has developed a robust operational platform for our
domestic operations in China, implemented a rigorous budgeting process, and utilized our information systems to monitor the
performance of our hotels. Our hotels are managed by general managers trained by us. General managers report to regional managers and
are responsible primarily for the day-to-day operation of our hotels. The regional managers oversee the operation of each hotel in the
relevant regions and they also regularly visit the hotels and supervise the marketing and promotion programs implemented by the general
manager of the hotel. General managers are involved early on in the process of constructing or converting a new property through the
opening of the new hotel. General managers, along with our quality inspection team, construction team and regional managers, are
responsible for implementing our standards for brand quality, handling personnel matters of hotel staff, maintaining proper financial
reports and records, overseeing procurement of hotel supplies to be purchased locally, and implementing marketing and promotional
programs. Each general manager serves as the primary contact point between our headquarters and every hotel, and works closely with
our corporate level departments in managing the performance of the hotels for which the general manager is responsible.

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Key features of our hotel management include the following:
Pricing. We set the room rates of our hotels based on a number of factors, including local market conditions with reference to room
rates set by our competitors, historical levels, recent occupancy levels and seasonal occupancy fluctuations. As we primarily target
individual business travelers and leisure travelers, the month in which the Chinese New Year falls generally accounts for a lower portion
of our annual revenues than other months, due to generally lower occupancy rates. Our headquarters in Shanghai reviews and establishes
standard room rates. Thanks to our updated revenue management system, room rate changes can be approved automatically when the
system is able to identify a rationale for a room rate adjustment by studying big data in the market. Otherwise, an individual hotel will
conduct a market study, and then send its proposed price change to our operation department and marketing department for approval,
generally within 24 hours. We regularly review room rates at each of our hotels under both franchised-and-managed and leased-and-
operated models and adjust rates based on occupancy levels, neighborhood market performance, historical levels, seasonality, and reports
from our general managers. We also negotiate contract rates with corporate members whose employees regularly stay at our hotels.
Budgeting and Monitoring. Our finance and accounting personnel work with each hotel’s general manager to prepare a detailed
annual budget. Based on financial and operating data gathered by the Central Reservation System, or CRS, and Property Management
System, or PMS, for each given hotel, we make projections as to expected revenue, hotel operating costs, expenditures on marketing,
renovations or other property improvements. Our centralized monitoring function also tracks trends in operating or financial
performance, in particular with respect to occupancy rates, average daily rates and RevPAR, and shares this information and analyses
with the hotel’s general manager so that appropriate strategies may be formulated in response to the data.
Quality Assurance. The quality and consistency of our hotels and accommodations are the keys to maintaining the integrity and
attractiveness of our brands. Our management plays a central role in assuring that the quality standards of our brands are implemented
uniformly across our hotel network. Regional managers and the general managers are responsible for supervising various aspects of the
operation of our hotels, including hotel maintenance and renovation, restaurant service, housekeeping and customer service, to help
ensure that our rigorous quality standards are maintained. Our quality inspection department dispatches teams to conduct both scheduled
and unannounced evaluations of each of our hotels, and notifies the hotel’s general manager of any repairs, maintenance work or
upgrades that need to be conducted. Our quality inspection department also regularly reviews and updates our quality standards and
oversees their implementation in each of our hotels.
Flexible and Cost-effective Procurement. We have a flexible procurement system that enables us to obtain the best pricing available
for the quality of goods sourced for our hotels and to minimize operating expenses. We maintain a list of approved suppliers for goods
used in our hotels which display any of our logos or brands. As a leading hotel network in China, we have significant leverage in price
negotiations with our suppliers and enjoy cost savings by purchasing in bulk, which cost savings we pass on to franchisees directly.
Franchisees are encouraged to negotiate favorable delivery prices directly with these suppliers. Franchisees are also encouraged to
recommend quality suppliers to us that meet our stringent standards, including as to quality, price, delivery and maintenance services,
and that can be approved by our central purchasing department. For other goods that do not display our logos or brands, franchisees can
opt to use either one of our approved suppliers or other suppliers as long as they can meet our standards. Franchisees can procure the
high-quality amenities and hotel consumables at favorable prices and terms and settle directly with the vendors via 168 Mall, which
partially serves as a procurement facilitation platform, where a group of qualified vendors we have screened and selected over the years
are able to list their products and market to franchisees directly. We believe this approach helps distinguish our brands, defines the style
of our hotels and ensures quality and consistent experience for our guests.
Franchisee Services. We provide dedicated support to our franchisees to assist them in addressing any issues that may require the
expertise of our various departments. We coordinate with our construction, engineering, procurement, information technology and other
departments to help answer questions or troubleshoot problems which a franchisee brings to us. Our franchisee services department
provides an alternative channel, in addition to the hotel general manager, for our franchisees to seek assistance. We believe that this
service underscores our commitment to our service-oriented culture and strengthens the relationships we have with our franchisees.

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GreenTree Academy and e-Learning Program. GreenTree Academy formed in 2006, is our internal hotel management school. Each
of our general manager candidates is required to complete a two-month training program through the GreenTree Academy. The first
stage of this training program is one-month classroom study, and the second stage is one month of on-site training conducted at one of
our hotels. The one-month classroom study features live lectures covering hotel operation and management skills. The one-month on-site
training provides our general manager candidates with an opportunity to apply all of the skills they have learned and to gain a better
understanding of our GreenTree Inns standards our guest-focused and our service-oriented philosophy. Trainers and professors for our
GreenTree Academy are invited from our own senior management team and outside professionals in the hospitality industry. In addition
to cultivating our general manager candidates, our GreenTree Academy also is responsible for delivering training to our new hotel
employees and regional general managers, each course program with different focuses. Our GreenTree Academy supervises and assists
the general manager of each hotel to conduct weekly training for hotel employees at various levels. The GreenTree Academy coordinates
to compile and disseminate training materials, monitors progress and assesses training results. We currently have 27 dedicated staff to
organize and coordinate the training activities delivered by the GreenTree Academy. In addition, we also have an e-Learning Program in
place through which all training materials are organized and uploaded to our internal website. Through our e-Learning Program, all
valuable knowledge and experience are preserved and accumulated and can be broadly shared and conveniently referred to by our
employees. In order to be granted a promotion, hotel employees either on our payroll or the payrolls of our franchisees need to complete
certain GreenTree Academy and/or e-Learning Program modules and pass exams relevant to their desired job role.
Hotel Information and Operational Systems
Our proprietary information and operational systems, which compiles information from all of our hotels with our operational
systems, is a key tool that allows us to track occupancy levels, average daily rate, RevPAR, net operating income and other important
operational data and performance indicators for each of our hotels and operating divisions. These systems facilitate the storage,
processing and analysis of large amounts of data, which we use to improve our cost-efficiency, to allocate managerial and marketing
resources more effectively, to analyze the impact of our marketing and promotional campaigns and set prices levels to maximize
RevPAR. By centralizing and organizing our operations and financial data, our information and operational systems enable us to respond
promptly and effectively to business trends in specific hotels or localities. We believe that centralizing our information and operational
systems and providing our franchisees with ongoing access to these systems and information also helps our franchisees to operate more
profitably, enhancing our ability to retain existing franchisees and attract new franchisees with operation efficiency and cost-efficiency.
Our principal hotel information and operational systems comprise the following:
Technologies for internal operations. We consistently look into how our employees interact with technologies and have adapted to
the needs of the modern workforce. As early as 2014, we developed and launched a suite of innovative tools that digitize every key
aspect of our frontline employees’ daily routines. This set of tools modernizes the traditional handwritten logs for frontline employees,
and thereby increases the speed and efficiency of our entire business process, from the moment when a new hotel project is signed, to our
construction or conversion, daily operations and quality assurance.
“GreenTree Aide”
“GreenTree Aide” is a dedicated app that assists with and digitizes a hotel’s daily operations as well as links hotels’ operation data to
our franchisees. We are a pioneer in the hospitality industry in China to realize the real-time interaction between operating activities and
our franchisees. The app is self-developed by us to ensure the efficiency, safety and stability of our daily operation, and has a number of
functions, including monitoring the regional managers’ work, managing the hotel managers’ work and providing real-time information to
our franchisees. GreenTree Aide creates, assigns, prioritizes and monitors individual and group tasks and keeps track of all aspects of a
hotel’s daily operations in the following respects.

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For the hotel’s daily operations and sales tasks, hotel regional manager teams use this app to record their patrol plans, highlight the
hotel’s problems inspected by them in each hotel and track the solving process of each problem. A hotel manager uses this app in its
daily management operations, including reporting assigned work, conducting hotel procurement, proposing digital contracts, adjusting
room rates and other revenue management measures. In 2017, we further upgraded the function as a dashboard for the housekeeping
team to mark clean and dirty rooms. The housekeeping team uses this app to identify and manage daily room maintenance needs and
increase housekeeping efficiency with instant updates on housekeeping mobile devices when customers check out, freeing up rooms for
cleaning. In addition, our franchisees are able to use this app to monitor the key hotel operating data, compare the performance of our
adjacent peers and ensure guest satisfaction. The franchisees also use this app to receive notifications and alerts from us, including hotel
promotions and advertisements.
DPMS
DPMS, or development process management system, streamlines and digitizes the franchise sales process, including prospecting, e-
proposals, digital contracts, workflows and reporting. Linked directly to the management information system (which is further elaborated
below), the DPMS is designed to increase conversion rates and improve sales performance.
PPMS
PPMS, or project process management system, is designed to assist our maintenance and engineering department to maintain a clear
overview of the construction/conversion progress of hotels and all routine inspections and repairs.
QPMS
QPMS, or quality process management system, is dedicated to our quality inspection activities. The quality control personnel
through QPMS have access to our quality standards and a set of check forms when conducting inspections. After inspections are
completed, QPMS automatically generates an inspection report and notifies the hotel managers of any repairs, maintenance work or
upgrades that need to be conducted.
Financial and Accounting System. Our financial and accounting system is used both by employees in our financial and accounting
department at our headquarters. Our financial and accounting system manages our accounts receivable, accounts payable, expenses
tracking, bookkeeping, taxation and other services.
We vigilantly protect our information and operational systems. We use redundant power systems and Internet access to ensure that
our guests can continually access our website, even in the event of a power outage at our main data center or a disruption in the
connection between our PMS and our hotels. All of our servers are equipped with uninterrupted power supplies, and are supported by
backup power generators as well as redundant file systems to help ensure the continuous availability of our data. We also regularly back
up our data to minimize any potential impact of data loss due to system failure.
We have upgraded the infrastructure of our information and operational systems. These upgrades enable us to rapidly develop our
business by increasing the number of hotels in our network. Our data center can support a large number of guests simultaneously
accessing our mobile applications and website hotel reservations systems.
We also are improving the security of our IT systems, which includes developing the security of our office networks, our internal
virtual private network and our guests’ access to our networks.
In addition, we have enabled greater accessibility to our internal systems by our employees through the addition of e-Meetings as
well as e-Human Resources, or e-HR, and e-Learning systems.
e-HR system. Our e-HR system enables comprehensive tracking of the organizational and personnel information of our company.
Through this system our HR department is able to dynamically manage information about our employees and more efficiently administer
standard programs as to wages, welfare benefits, work attendance, vacations and performance. Such data are securely stored on the
system and allow our HR department to supervise the training and development of our personnel.

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e-Learning system. Our e-Learning system offers modular, video-based programs to all employees of our company. This system
enables personnel to acquire professional knowledge and complete courses in which they are interested at their own pace in order to
develop skills and advance their careers. The content and materials for each course module are developed and produced by our internal
hotel management school, GreenTree Academy team. Each course module is only 5-10 minutes in length for condensed, convenient
learning. Additionally, the GreenTree Academy formulates learning plans for different job positions on a regular basis to help clarify and
assist staff with planning their vocational development so they can enhance their existing skills. Recognizing that hospitality is a career
choice for professionals, we train most of our key hotel employees, including hotel managers and the “GreenTree Quintet”- front office
managers, sales managers, financial managers, guest services managers and hotel manager assistants.
e-Meeting system. Our e-Meeting system supports routine management and training activities of our company by increasing
efficiency of inter-departmental meetings and by facilitating remote working arrangements outside normal business hours. This system
also enables the operations department to provide remote online management training to hotel managers, staff and franchisees on a
weekly basis, helping to make our operations and management practices more efficient and consistent.
Technologies for franchisee support
We have developed our proprietary and scalable technology infrastructure with modules covering every key aspect of hotel operation
to assist and empower our franchisees, improve their efficiency and maximize their value.
Central Reservation System (CRS)
Our central reservation system, or CRS, is our primary information collection and distribution platform, which is operated by our
team of IT specialists based in Shanghai. Our hotel rooms may be reserved through multiple channels, including our reservation mobile
applications and website, our 24-hour toll-free call center, our WeChat mini-program, each hotel’s front desk, as well as third-party hotel
reservation agents and OTAs such as Meituan, eLong, Qunar, Alitrip, Booking, Expedia and Agoda. A predominant proportion of our
room night sales was generated from our strong direct sales channels comprising our website and mobile app. In 2020, 2021 and 2022,
approximately 91% of the room nights in our hotel network were sold through our direct sales channels, while OTAs contributed
approximately 9% of our room nights.
Information about reservation at our hotels is gathered and processed by the CRS and connected and distributed back to each of the
multiple reservation channels in real-time. Through our CRS, we can monitor, on a real-time basis, the availability of each hotel room.
Real-time and detailed hotel room reservation information enables us to maximize the efficient use of our rooms. In addition, the CRS is
responsible for managing the information of our strong membership program, where it records and analyzes members’ personal
information, membership points, visit history and feedback, based on which we and our franchisees are able to effectively gather, analyze
and make use of such proprietary customer behavior and transaction data to generate actionable insights to perform precision marketing,
improve service quality and enhance overall customer lifecycle management.
To maximize convenience and further enhance our customers’ satisfaction, we are committed to improving the functionality of our
mobile app on an ongoing basis so that customers can make advance bookings for rooms based on their desired room style, conferences,
check-in and check-out, as well as place orders for food and beverages.
Property Management System (PMS)
We have launched a cloud-based property management system, or PMS. Unlike onsite-PMSs, which require significant upfront
hardware investment and are costly and time-consuming to upgrade, our cloud-based PMS is highly scalable and enables the
simultaneous launch of new services across all hotels, which helps us further expand and grow our franchisee network rapidly.
Our PMS houses all administrative tools a franchisee’s hotel managers and front desk staff need to manage every hotel’s daily
business operations, including hotel room management, budget management and membership management. Each franchisee hotel is
equipped with the PMS server and, based on financial and operating data collected by the PMS, our franchisees can make projections for
each given hotel as to expected revenue, hotel operating costs, expenditures on marketing, renovations or other property improvements.
The PMS is further synchronized with the CRS to facilitate access to our members’ information. The PMS enables us to monitor the
operations of each hotel in our network and to regularly obtain fundamental business data for analysis by our management.

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Management information system (MIS)
We have launched a proprietary management information system, or MIS system, which serves as the backbone of our technology
and IT infrastructure and is applied in all aspects of our business operations. MIS effectively manages the full cycle of our franchisee
hotels, starting from new project initiation and planning, construction or conversion of a new property, hotel opening, procurement, daily
operations, quality control to hotel closure. Throughout the process, the MIS collects, monitors and analyzes various key operational and
financial data and provides a series of data-driven optimization strategies and recommendations. The MIS compiles information from the
CRS and PMS to establish a database and extracts data based on the needs of our management. The MIS system enables us and our
franchisees to generate useful insights from and conduct in-depth analyses of the vast amount of data gleaned from our daily operations,
and assists the management in formulating and optimizing hotel operations with agility and confidence in the face of increasing business
and time pressure, as well as increasing complexity of guest services. These operational reports, in turn, enable our regional managers to
monitor the performance of hotels in a given region, and nationwide hotel data compilations, statistical reports and comparison analyses
facilitate strategic and tactical decision-making by its management.
In addition, the MIS helps our hotel management ascertain certain factors contributing to our operational statistics, helps provide
advance warning of potential problems and aids with their correction. Hotel general managers and regional managers use data provided
by the MIS to refine and improve hotel performance and respond to market changes at the local level in a timely manner. The MIS also
helps evaluate the performance of each of our hotel general managers and regional managers.
Technologies for guest services
We have developed a full suite of hotel-level digital transformation initiatives to improve guest satisfaction in every step of customer
interactions, from check-in to check-out.
Self-serve initiatives
We have launched our user-friendly, self-check-in/out services in our app to shorten both customers and front-desk staff’s time. We
also launched a self-serve room selection function on our apps, where guests are able to access a hotel’s floor plan and room layout and
choose a room with their preferred floor level, view, proximity to elevators, and potential nearby noise sources. In September 2018, we
launched a self-serve stay extension function on our apps and website, which effectively reduces our staff-to-room ratio.
Robot assistants
The use of robot assistants in our hotels is intended to attract guests, especially young professionals and travelers. These AI-powered
smart robots can move around the entire hotel to make deliveries of snacks, toiletries and other hotel amenities, greet guests and lead
them to their rooms, improving both the hotel’s operating efficiency and guest experience.
One-click Wi-Fi access
One-click Wi-Fi access has been rolled out to our customers for convenience purposes, where guests can authenticate their identity
and easily access a hotel’s Wi-Fi network without the need of inputting passwords.
IoT enabled guest rooms
IoT technologies to our hotel rooms can enhance quality of guests’ stays. Our IoT enabled guest rooms to allow guests to control the
room temperature, lights, window shades and provide room cleaning service, wake-up call service and hotel check-out appointment as
well as requesting electronic invoices through their mobile phones or other room facilities.
Internet Service System
Our Internet Service System consists of our website (www.998.com), our mobile apps for smartphones running iOS, Android or
other operating systems, and our WeChat mini-program for the purpose of reserving rooms. The system provides our members and the
general public with convenient, friendly and updated services, including information and search services for our hotels, such as location,
amenities and pricing, reservation services, online payment and online room selection functions, membership registration and
management and corporate member services.

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Sales and Marketing
Franchisees
We intend to continue expanding our hotel network primarily through our franchised-and-managed model. Our business
development team utilizes our brand names and our national presence to engage with potential franchisees and to compete with other
economy and mid-scale hotel networks. We aim to share our business philosophy with potential franchisees and emphasize the
consistency of our services. We emphasize the benefits of affiliating with our brands, our commitment to improving hotel profitability,
our proprietary operations system, our training and support program and our extensive network of corporate members and individual
members. Our objective is to grow our franchise base by continuing to promote our brands. We also encourage franchisees to operate
multiple hotels under our brand by offering volume discounts on franchise management fees to franchisees who open multiple hotels
under our brand within a certain period of time. We do not, however, encourage franchisees to open too many hotels simultaneously to
ensure that their existing hotel operations receive due attention and that our guests enjoy the consistent quality services they deserve. As
of December 31, 2022, we had 400 franchisees who repeatedly opened hotels with a total number of 1,035 hotels under our brands.
When we spot new hotel development opportunities, we offer these prime opportunities to existing franchisees, developers of hotels,
owners of independent hotels and motels, and owners of hotels affiliated with other economy and mid-scale hotel chains on a priority
basis. We believe that this practice will enhance trust between us and existing and potential franchisees and may effectively increase our
ability to convert such development opportunities into hotels under our franchised-and-managed model.
Guests
Our guest sales and marketing efforts target individual business and leisure travelers. Despite our growing number of international
guests, our guests are primarily PRC citizens. As of December 31, 2022 approximately 96.6% of our guests were intra-Asia travelers.
Our marketing and advertising efforts also include outdoor advertisements such as billboards and signs, advertisements and materials at
our hotels, promotional materials sent to our members, television, Internet and radio advertising, advertising on high-speed rail networks,
print advertising in consumer media and at promotional events, special holiday promotions, co-marketing activities, and cooperation with
popular Internet social platforms. The focus of our marketing and advertising programs is to promote the core characteristics of our
brands — comfort, quality, value and convenience. Our advertising campaigns encourage consumers to “just experience” our hotels and
to contact us directly. Furthermore, by integrating with food and beverage’s joint customer loyalty programs, we benefited from the
attraction of these chain restaurants, and providing our individual members with more options to redeem their membership points for
food. We continued to roll out our food and beverage concept by branding food and beverage services into our hotels to turn them into
profit centers and attract additional guests to our hotels. Regarding marketing, we are formulating joint marketing programs with several
banks to attract local corporate clients and high-value business travelers.
Our Investments
Yibon
In April 2017, we purchased 30% of the equity interest in Yibon Hotel Group Co., Ltd., or Yibon, together with a group of investors
that are not related to us. Yibon is a hotel operator focusing on the economy hotel segment in China. As of December 31, 2022, Yibon
had 721 hotels with 39,186 rooms and 281 hotels in the pipeline with 16,709 rooms planned. In 2022, Yibon recorded a net loss, partially
due to the impact of COVID-19. Furthermore, holders of 70% of equity interest in Yibon Hotel Group Co., Ltd., or Yibon, have the right
to exchange their equity interest in Yibon into our shares within a certain period after Yibon delivered a consolidated financial report for
the year of 2019 audited by “big four” accounting firm in accordance with a formula using Yibon’s net profit achieved in the year of
2019 as calculation basis. Yibon recorded a net loss in 2019, and such holders were unable to exchange for our shares based on Yibon’s
financial results of 2019. Besides, we have an option to require the original shareholder to redeem the 30% investment.

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Employees
We had 2,565, 2,892 and 2,063 employees as of December 31, 2020, 2021 and 2022, respectively. None of our employees is
represented by a labor union. As of December 31, 2022, out of our 2,063 employees, 492 were leased-and-operated hotel-based staff,
1,050 were franchised-and-managed hotel-based staff, 140 were investment and development staff, 99 were regional manager/operations
staff, 2 were quality control staff, 14 were central reservation center staff, 27 were GreenTree Academy training staff and 239 were
working at our headquarters offices. We believe that our employees are our company’s greatest resource and that developing and
retaining a team of capable and motivated staff is critical to our success. We aim to hire managerial employees who possess backgrounds
and experience in the hospitality industry and other services industries having an emphasis on addressing customers’ needs. We also
recruit top graduates from highly-ranked universities that offer courses of study in hotel management. We require our employees to have
at least a two-year associate’s degree. We aim to recruit, train and retain the best talent through a disciplined recruiting and training
process while offering competitive performance-linked and KPI-driven career advancement and development opportunities.
General Managers
To help ensure that our franchised-and-managed hotels provide high-quality service on a consistent basis, our general managers and
certain other managerial employees of our franchised-and-managed hotels are trained and dispatched by us. Pursuant to the franchise-
and-management agreements, the Group charges the franchisees fixed hotel manager fees to compensate the Group for the franchised-
and-managed hotel managers’ salaries, social welfare benefits and certain other out-of-pocket expenses as incurred. The hotel manager
fee is recognized as revenue on a monthly basis. In addition to the standard compensation, our franchisees also are permitted to offer
performance-based compensation to managers of their locations. Several factors are considered in evaluating our general managers such
as financial performance of the hotel for which the general manager is responsible, guest satisfaction, employee satisfaction, results of
the hotel’s periodic quality inspections and results of the general manager’s training programs and annual examinations.
Employees of Franchised-and-Managed Hotels
At our franchised-and-managed hotels, aside from our general managers, we do not employ hotel employees and we therefore are
not responsible for compensating local employees, which functions are undertaken by the franchisee. However, to help ensure that our
franchised-and-managed hotels provide high-quality service on a consistent basis, we have in place both mandatory and optional training
programs designed for employees of our franchised-and-managed hotels. These training programs provide quality monitoring assistance
and comprehensive training on various aspects of hotel operations. With our franchisees’ permission, we also offer promotions to hotel
employees, opportunities to join our company and transition to other roles within our network, based on demonstrated job performance
as well as satisfactory completion of mandatory training programs and passing examinations. We also encourage our franchisees to
follow our employment practices since we believe that these practices will help employees of our franchised-and-managed hotels
improve productivity, increase job satisfaction, and feel a similar sense of ownership loyalty to us and our brands.

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Employees of Leased-and-Operated Hotels
As of December 31, 2022, we had 492 employees working for our leased-and-operated hotels. Two to three months in advance of a
hotel’s opening, all of the hotel’s employees are required to complete formal training under the supervision of the hotel’s general
manager and our human resources department. GreenTree Academy staff and our regional managers will conduct an inspection of the
hotel’s quality after the conclusion of the training. For general managers, we have an additional two-month program to give them
experience in each of our departments on a rotating basis to get further training. Some of these new hires will be selected and promoted
to the position of duty manager, and outstanding trainees will quickly be promoted to the position of general manager. We have found
this training program to be effective in initiating and motivating our new hires.
Competition
China’s hospitality industry is fragmented, highly competitive and ripe for consolidation, especially among branded hotel chains. We
compete with other branded and stand-alone hotels for guests in each of the markets where we operate. Different brands in the hospitality
industry compete primarily on the basis of room rates, quality of accommodations, brand name recognition, convenience of location,
geographic coverage, quality and range of services provided, guest amenities and membership benefits. We compete mainly with other
hotel groups as well as various stand-alone lodging facilities in each of the markets in which we operate, including brands such as
Jinjiang, Ji Hotel, Home Inns, 7 Days Inn, Hanting, Atour Hotel and international hotel brands. We also face competition from serviced
apartments.
Intellectual Property
Our brand, trade names, trademarks, trade secrets and other intellectual property rights distinguish our technology platforms,
services and products from those of our competitors. Our intellectual property contributes to our competitive advantage in the economy
and mid-scale hotel segments of China’s hospitality industry. To protect our brand and other of our intellectual property rights, we rely on
a combination of trademark, trade secret and copyright laws. We also impose confidentiality obligations on our employees, contractors
and other persons who provide services to our company. As of December 31, 2022, we had a total of 456 trademarks, 74 software
registration certificates and one copyright registered in China. The expiration dates of our trademarks fall between 2023 and 2033,
including “GreenTree Inn.” Once the ten-year term of our registered trademarks has expired, we will be able to renew our trademark
registrations for another ten years upon paying a renewal fee. We have registered our domain names, including 998.com, greentree.cn,
greentree.com.cn and others, with the Internet Corporation for Assigned Names and Numbers, or ICANN.
Our efforts to protect our intellectual property rights may not be adequate, and third parties may infringe on or misappropriate our
rights. If others are able to copy and use our proprietary information and operational systems and other proprietary technology platforms
of ours without spending time and resources to develop their own, we may not be able to maintain or improve our competitive position.
Furthermore, the application and interpretation of laws governing intellectual property rights in China is uncertain and evolving and
could involve substantial risks to us. If litigation is necessary to enforce our intellectual property rights, or to determine the scope of the
proprietary rights of others, we may have to incur substantial costs or divert other resources which could harm our business and
prospects. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business — Any failure to protect our trademarks
and other intellectual property rights could negatively impact our business.”
Insurance
We believe that our hotels are covered by adequate property, equipment liability and money insurance policies with coverage
features and insured limits that we believe are customary for similar companies in China. We also require our franchisees to carry
adequate property, equipment liability and money insurance policies. We carry property insurance that covers the assets that we own at
our hotels. Although we require our franchisees to carry customary insurance policies, we cannot guarantee that they will adhere to this
requirement and actually purchase such policies. If we were held liable for amounts and claims exceeding the limits of our insurance
coverage, or outside the scope of such coverage, our business, financial condition and results of operations may be materially and
adversely affected. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business — We have limited insurance
coverage.”

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Properties and Facilities
Our headquarters are located in Shanghai, China, where we lease approximately 6,752 square meters of office space.
Owned Properties
As of December 31, 2022, we owned 11 hotel properties having an aggregate gross floor area of 92,360 square meters. For more
detailed information about the locations of our hotels, see “— Our Hotel Network.”
Leased Properties
As of December 31, 2022, we had leased a total of 69 properties, with 63 properties for hotel operations and six properties for other
uses, such as headquarters and office premises. The gross floor area of our leased properties ranges from approximately 20 square meters
to 46,176 square meters.
Legal Proceedings
We have been subject to legal proceedings, investigations and claims incidental to the conduct of our business from time to time,
including actions relating to among others property lease, franchise agreements with our franchisees, infringement of our brand,
employment-related disputes, personal injury, property damage or other harm resulting from acts or omissions by individuals or entities
outside of our control, including franchisees and third-party property owners. Various disputes in connection with the properties we lease
or with the franchise agreements may occur from time to time, which may cause our hotel operations to be affected or terminated in the
worst-case scenario. As of December 31, 2022, we had 15 pending legal proceedings in connection with the franchised-and-managed
hotels. We are the plaintiff in most of these cases. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business —
We are subject to risks related to litigation filed by or against us, and adverse litigation results may harm our business and financial
condition.”
Except as otherwise disclosed in this annual report, we are not currently a party to, nor are we aware of, any legal proceeding,
investigation or claim which, in the opinion of our management, is, individually or in the aggregate, likely to have a material adverse
effect on our business, financial condition or results of operations.
We have not set aside a reserve fund for litigation its which we are the defendant, because we believe that we are not likely to lose
such litigation, or that if we were to lose such litigation, such loss would not have a material effect on our financial condition and results
of operations.
Corporate Social Responsibility: Environmental Impact
We have established a comprehensive digital human resources management system, and strive to create a platform that is conducive
to the learning, development and growth of our employees. We have implemented a digital transformation from talent management,
performance-based compensation, learning and training, to help build a sound foundation for our company’s further rapid development.
We are committed to building a green supply chain. We support the use of more energy-efficient appliances and recyclable single-
use items for hotels. Our hotel designs strive to reduce costs while extending service life by using environmentally-friendly and durable
materials such as bamboo, rock and wood fiber in lieu of non-renewable materials. These designs are modern and aesthetically pleasing,
in addition to being sustainable over the longer term. Our hotel designs and materials used also enable faster installation and shorter
construction timeframes, thereby reducing consumption and conserving energy to help protect the environment.
At a critical juncture in the control and prevention of the further outbreak of COVID-19, our company’s hotels voluntarily assumed
roles in receiving and helping to isolate persons who tested positive for the virus. Hotel staff, sometimes along with medical staff, were
on standby 24 hours a day. During the lockdown period in Shanghai, Daniang Dumplings and Bellagio timely adjusted their operations to
cooperate with the government’s epidemic prevention requirements, and endeavored to assist Shanghai residents with securing their
material well-being.

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To support and give back to society, we have preferential procurement arrangements with amenity producers that employ persons
with disabilities. Each year when China’s college entrance examinations are held, we call on our hotel brands to be the “preferential
leisure room for college entrance examinations” to provide places of respite for students to relax and recharge in between examinations.
Regulatory Matters
This following is a summary of the material laws and regulations or requirements that affect our business activities in China or the
rights of our shareholders to receive dividends and other distributions from us.
The hotel industry in China is subject to a number of laws and regulations, including laws and regulations relating specifically to
hotel operation and management and commercial franchising, as well as those relating to environmental and consumer protection. As
with other industries in China, regulations governing the hotel industry in China are still developing and evolving and might be amended,
upgraded or re-enacted from time to time. As a result, when any prevailing regulations are amended or upgraded, the hotel industry may
be required to meet new or stricter standards, criteria or requirements. This section summarizes the principal PRC regulations currently
relevant to our business and operations.
Regulations on Foreign Ownership
The Foreign Investment Law of the PRC enacted by the National People’s Congress, or the NPC, on March 15, 2019, and the
Regulations for Implementation of the Foreign Investment Law of the People’s Republic of China, or the Implementation Regulations,
promulgated by the State Council, both of which became effective on January 1, 2020 replaced the trio of existing laws regulating
foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture
Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The
organization form, organization and activities of foreign-invested enterprises shall be governed, among others, by the Company Law of
PRC and the Partnership Enterprise Law of PRC. Foreign-invested enterprises established before the implementation of the Foreign
Investment Law may retain the original business organization and so on within five years after the implementation of this Law.
According to the Foreign Investment Law, foreign investments are entitled to pre-entry national treatment and are subject to negative
list management system. The pre-entry national treatment means that the treatment given to foreign investors and their investments at the
stage of investment access is not lower than that of domestic investors and their investments. The negative list management system
means that the state implements special administrative measures for access of foreign investment in specific fields. Foreign investors
shall not invest in any forbidden fields stipulated in the negative list and shall meet the conditions stipulated in the negative list before
investing in any restricted fields. Foreign investors’ investment, earnings and other legitimate rights and interests within the territory of
China shall be protected in accordance with the law, and all national policies on supporting the development of enterprises shall equally
apply to foreign-invested enterprises.
Investment activities in the PRC by foreign investors are principally governed by the Catalog of Industries for Encouraging Foreign
Investment, or the Encouraging Catalogue, and the Special Management Measures (Negative List) for the Access of Foreign Investment,
or the Negative List which were promulgated and are amended from time to time by the PRC Ministry of Commerce, or MOC, and the
National Development and Reform Commission, or NDRC, and together with the Foreign Investment Law and their respective
implementation rules and ancillary regulations. MOC and the NDRC promulgated the Catalogue of Industries for Encouraging Foreign
Investment (2022 Version), on October 26, 2022, and the Special Management Measures (Negative List) for the Access of Foreign
Investment (2021), or the 2021 Negative List, on December 27, 2021, to replace the previous encouraging catalogue and negative list
thereunder.
Under the Measures on Reporting of Foreign Investment Information approved by MOC and the State Administration for Market
Regulation, or SAMR, which came to effect on January 1, 2020, Foreign investors or foreign investment enterprises shall submit
investment information through submission of initial reports, change reports, deregistration reports and annual reports to the commerce
administrative authorities through the Enterprise Registration System and the National Enterprise Credit Information Publicity System.
Where a foreign investor or foreign-funded enterprise, in violation of the provisions of the present Law, fails to report the investment
information as required to the foreign investment information report system, the competent department for commerce concerned shall
order it to make corrections within a time limit; if it fails to do so within the prescribed time limit, a fine of not less than 100,000 yuan
but not more than 500,000 yuan shall be imposed.

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According to the Measures for the Security Review of Foreign Investment promulgated by the NDRC and the MOC on
December 19, 2020 and became effective on January 18, 2021, the NDRC and the MOC will establish a working mechanism office in
charge of the security review of foreign investment. Such measures define foreign investment as direct or indirect investment by foreign
investors in the PRC, which includes (i) investment in new onshore projects or establishment of wholly foreign owned onshore
companies or joint ventures with foreign investors; (ii) acquiring equity or asset of onshore companies by merger and acquisition; and
(iii) onshore investment by and through any other means. Investment in certain key areas with bearing on national security, such as
important cultural products and services, important information technology and internet services and products, key technologies and
other important areas with bearing on national security, and in the acquisition of de facto control of investee companies, shall be filed
with the specifically established office before such investment is carried out. What may constitute “onshore investment by and through
any other means” or “de facto control” could be broadly interpreted under such measures. It is likely that control through contractual
arrangement be regarded as de facto control based on provisions applied to security review of foreign investment. Failure to make such
filing may subject such foreign investor to rectification within prescribed period, and will be recorded as negative credit information of
such foreign investor in the relevant national credit information system, which would then subject such investors to joint punishment as
provided by relevant rules. If such investor fails to or refuses to undertake such rectification, it would be ordered to dispose of the equity
or asset and to take any other necessary measures so as to return to the status quo and to erase the impact to national security.
Regulations on Mergers and Acquisitions
Under the Measures on Reporting of Foreign Investment Information, foreign investors undertaking a merger and acquisition of a
non- foreign investment enterprise in China shall submit an initial report through the Enterprise Registration System at the time of
completion of change registration for the target enterprise.
A foreign investor acquiring shares, equities, property shares or any other similar rights and interests of an enterprise within the
territory of China shall be subject to the Foreign Investment Law, which means if the investors do not follow the present law during the
transaction of mergers and acquisition, the party may be subject to the penalties and fines under the newly promulgated Foreign
Investment Law.
Regulations on Hotel Operation
In November 1987, the Ministry of Public Security issued the Measures for the Control of Security in the Hotel Industry, and in
June 2004, the State Council promulgated the Decision of the State Council on Establishing Administrative License for the
Administrative Examination and Approval Items Really Necessary To Be Retained, which was amended on August 25, 2016. Under
these two regulations, anyone who applies to operate a hotel is subject to examination and approval by the local public security authority
and must obtain a special industry license. The Measures for the Control of Security in the Hotel Industry impose certain security control
obligations on the operators. For example, the hotel must examine the identification card of any guest to whom accommodation is
provided and make an accurate registration. The hotel must also report to the local public security authority if it discovers anyone
violating the law or behaving suspiciously or an offender wanted by the public security authority. The Law of the PRC on Penalties for
the Violation of Public Security Administration was promulgated on October 26, 2012 and entered into force on January 1, 2013.
Pursuant to the Measures for the Control of Security in the Hotel Industry, the Law of the PRC on Penalties for the Violation of Public
Security Administration and relevant local regulations, operating a hotel business without having obtained a special industry license may
subject the operator to warnings, detention of between 10 and 15 days as well as fines of RMB500 to RMB1,000. Operators of hotel
businesses who failed to obtain the special industry license, or who obtained the special industry license but have violated applicable
administrative regulations, may also be subject to orders to suspend or cease their operations. According to the regulations of certain
cities/provinces, such as Jiangsu, operating a hotel business without having obtained a special industry license may be banned by relevant
public security departments, confiscated illegal gains, illegally operated items, and tools and equipment directly used for illegal
operations, and a fine ranging from RMB5,000 to RMB20,000 shall be imposed; if the circumstances are serious, they shall also be fined
between RMB20,000 to RMB200,000. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business — Failure to
comply with government regulations relating to the leased-and-operated and franchised-and-managed business models, hospitality
industry, construction, fire prevention, food hygiene, safety and environmental protection could materially and adversely affect our
business and results of operations.”

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In April 1987, the State Council promulgated the Public Area Hygiene Administration Regulation and subsequently amended the
same on February 6, 2016 and April 23, 2019, and on March 10, 2011, the Ministry of Health promulgated the Implementing Measures
for the Public Area Hygiene Administration Regulation and the National Health and Family Planning Commission amended this
regulation on January 19, 2016 and on December 26, 2017. According to these regulations, a hotel must obtain a public area hygiene
license before opening for business. Pursuant to these regulations, hotels failing to obtain a public area hygiene license or comply with
other requirements set forth in such regulations may be subject to the following administrative penalties depending on the seriousness of
their respective activities: (i) warnings; (ii) fines between RMB500 and RMB30,000; or (iii) orders to suspend operations for
rectification, or to revoke the public hygiene license. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business
— Failure to comply with government regulations relating to the franchise business model, hospitality industry, construction, fire
prevention, food hygiene, safety and environmental protection could materially and adversely affect our business and results of
operations.”
Since 2018, management for waste sorting and recycling has been implemented across the country, and corresponding management
regulations and administrative penalties have been formulated for companies/persons who violate the waste sorting and recycling
management regulations, such as the Article 57 of Regulations on the Management of Domestic Waste in Shanghai. On January 31,
2019, the Standing Committee of the Shanghai Municipal People’s Congress issued the “Regulations on the Management of Domestic
Waste in Shanghai”, which were officially implemented on July 1, 2019. Article 57 of the regulations stipulates that if a company
violates the provisions of paragraph 1 of Article 24 of these regulations and fails to put household garbage into corresponding collection
containers, the urban management law enforcement department shall order it to make corrections immediately; if it refuses to make
corrections, it shall be fined not less than RMB5,000 but not more than RMB50,000.
On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the Production Safety Law of the
People’s Republic of China, which will be officially implemented on September 1, 2021. The law stipulates that production and business
entities shall educate and train employees on work safety to ensure that employees have the necessary knowledge of work safety, are
familiar with relevant work safety rules and regulations and safety operation procedures, master the safety operation skills of their posts,
and understand accidents emergency measures, and know their rights and obligations in safety production. In addition, employees who
are not qualified for work safety education and training should not allowed to work.
For production and operation companies that fail to provide safety production education and training to employees, dispatched
workers and interns in accordance with regulations, or fail to truthfully inform relevant production safety issues as required, they shall be
ordered to make corrections within a time limit and may be fined RMB50,000; If the correction is not made within the time limit, it shall
be ordered to suspend production and business for rectification, and a fine of not less than RMB50,000 but not more than RMB100,000
shall be imposed; the person in charge directly responsible and other directly responsible personnel shall be fined not less than
RMB10,000 but not more than RMB20,000.
In order to protect and improve the environment and prevent and control air pollution, the Standing Committee of the National
Congress formulated the Law of the People’s Republic of China on the Prevention and Control of Air Pollution, which was promulgated
and took effect on October 26, 2018. The operator shall install oil fume purification facilities and keep them in normal use, or take other
oil fume purification measures to discharge oil fume up to the standard and prevent pollution to the normal living environment of nearby
residents. It is also prohibited to build, rebuild or expand catering service projects that generate oily smoke, odor and exhaust gas in
residential buildings, commercial and residential complex buildings without special flues, and commercial floors adjacent to residential
floors in commercial and residential complex buildings.
Article 118 stipulates food and beverage business operators which emit fume and violate the provisions of this Law in failing to
install and use fume purification facilities properly or failing to adopt other fume purification measures and emit fume beyond the
emission standards shall be ordered by the supervision and administration authorities determined by the local People’s Governments of
county level and above to make correction, and be subject to a fine ranging from RMB5,000 to RMB50,000; offenders who refuse to
make correction shall be ordered to suspend production and rectify; Offenders who violate the provisions of this Law in undertaking new
establishment, alteration and expansion of food and beverage business operations which emit fume, odor and waste gases within
residential buildings, commercial cum residential buildings which have not installed complementary dedicated flue, and commercial
floors of commercial cum residential buildings adjacent to residential floors, shall be ordered by the supervision and administration
authorities determined by the local People’s Governments of county level and above to make correction; offenders who refuse to make
correction shall be ordered to close down, and be subject to a fine ranging from RMB10,000 to RMB100,000.

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With the purpose of guaranteeing food safety and the safeguarding the health and life safety of the public, the SCNPC enacted the
PRC Law on Food Safety in February 2009 and amended the same on April 24, 2015, on December 29, 2018 and on April 29, 2021.
Also, the SCNPC adopted the Implementation Rules of the Food Safety Law which became effective on July 20, 2009 and amended on
February 6, 2016 and on October 11, 2019. On March 4, 2010, the Ministry of Health promulgated the Administrative Measures on Food
and Beverage Service Licensing and Administrative Measures on Food Safety Supervision in Food and Beverage Services. Both
measures came into force on May 1, 2010. Pursuant to the above measures, providers of consumer food services are required to obtain a
food catering service license, and are responsible for safety in food and beverage services. On July 30, 2009, the SAIC promulgated the
Administrative Measures for the Food Circulation License which was subsequently repealed in 2015 to comply with the newly amended
PRC Law on Food Safety. Under this measure, providers for food circulation service shall obtain a food circulation license. In
August 2015, the China Food and Drug Administration, or the CFDA promulgated the Administrative Measures for Food Operation
Licensing and subsequently amended the same on November 17, 2017. Also, the CFDA adopted the Announcement on Launching the
Use of Food Business License which became effective on September 30, 2015. Under the above measures, a food operation permit shall
be obtained in accordance with the law to engage in food selling and catering services within the territory of the People’s Republic of
China. The former catering service or circulation license will be deregistered by the authority that has issued the license upon its
expiration. However, a former catering service or circulation license that does not expire will continue to be valid; if, during the validity
period thereof, the food business operator applies for replacing it with food operation license, the licensing authority shall make the
replacement according to relevant provisions. Currently, each of the restaurants run in our hotels is required to obtain a food operation
license in order to offer food services. Pursuant to the PRC Law on Food Safety, hotels failing to obtain a food operation license (or
formerly food hygiene license) may be subject to: (i) confiscation of illegal gains, food illegally produced for sale and tools, facilities and
raw materials used for illegal production; or (ii) fines between RMB50,000 and RMB100,000 if the value of food illegally produced is
less than RMB10,000 or fines equal to 10 to 20 times of the value of food if such value is equal to or more than RMB10,000. See
“Item 3. Key Information — D. Risk Factors — Risks Related to Our Business — Failure to comply with government regulations
relating to the leased-and-operated and franchised-and-managed business models, hospitality industry, construction, fire prevention, food
hygiene, safety and environmental protection could materially and adversely affect our business and results of operations.”
The PRC legal framework governing fire prevention is set forth in the Fire Prevention Law which was adopted on April 29, 1998
and amended on April 29, 2021. According to the Fire Prevention Law and other relevant laws and regulations of the PRC, the Ministry
of Emergency Management and its local counterparts at or above county level shall monitor and administer the fire prevention affairs.
The Fire Prevention Law provides that the fire prevention design or construction of a construction project must conform to the national
fire prevention technical standards. Before construction and decoration of a hotel, the construction entity shall submit the fire prevention
design documents to the housing and urban-rural development authority for examination and approval. Upon completion, the
construction entity must go through the fire prevention acceptance check with the housing and urban-rural development authority and no
construction may be put into use before it is accepted by the relevant authorities. For each public assembly venue such as a hotel, the
construction entity or entity using such venue shall, prior to use and operation of any business thereof, apply for a safety check on fire
prevention with the relevant fire prevention department under the public security authority at or above the county level where the venue
is located, and such place could not be put into use and operation if it fails to pass the safety check on fire prevention or fails to conform
to the safety requirements for fire prevention after such check. Pursuant to these regulations, hotels failing to obtain approval of fire
prevention design plans or failing fire prevention safety inspections (including acceptance check and safety check on fire prevention)
may be subject to: (i) orders to suspend the construction of projects, use or operation of business; and (ii) fines between RMB30,000 and
RMB300,000. On July 28, 2019, the General Office of the CPC Central Committee and the General Office of the State Council
promulgated the Notice of the General Office of the Central Committee of the Communist Party of China and the General Office of the
State Council on Promulgation of the Opinions on Deepening the Reform of Fire Control Law Enforcement, or the Opinions. Under the
Opinions, public gathering premises (including hotels) may be put into use or commence business after obtaining a business license or
satisfying the conditions for putting into use pursuant to the applicable law, and upon submission of an application through the online
government services platform or onsite to the fire control departments and undertaking that the premises comply with fire safety
standards. Each hotel passing the fire safety inspection on public assembly venues will obtain a certificate for fire safety inspection on
public assembly venues. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business — Failure to comply with
government regulations relating to the leased-and-operated and franchised-and-managed business models, hospitality industry,
construction, fire prevention, food hygiene, safety and environmental protection could materially and adversely affect our business and
results of operations.”

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In January 2006, the State Council promulgated the Regulations for Administration of Entertainment Places and amended them on
February 6, 2016 and on November 29, 2020. Under these regulations, hotels that provide entertainment facilities, such as discos or
ballrooms, are required to obtain a license for entertainment business operations.
On October 18, 2010, the General Administration of Quality Supervision, Inspection and Quarantine and Standardization
Administration approved and issued the Classification and Accreditation for Star-rated Tourist Hotels (GB/T14308-2010), which became
effective on January 1, 2011. On November 19, 2010, the National Tourist Administration promulgated the Implementation Measures of
Classification and Accreditation for Star-rated Tourist Hotels, which also became effective on January 1, 2011. Under these regulations,
all hotels which have been in operation for over one year are eligible to apply for a star rating assessment. There are five ratings for
tourist hotels from one star to five stars, which ratings are assessed based on facilities, management standards and quality of service. A
star rating, once granted, is valid for three years.
On April 25, 2013, the SCNPC issued the Tourism Law of the People’s Republic of China, which became effective on October 1,
2013 and was most recently amended on October 26, 2018. According to this law, accommodation providers must fulfill the obligations
under their agreements with customers.
All of the foregoing regulations on hotel operation apply to our company both as the operator of our leased-and-operated hotels, and
as the franchisor of our franchised-and-managed hotels.
Regulations on Leasing
Under the Law on Urban Real Estate Administration promulgated by the SCNPC, which took effect as of January 1995 with the
latest amendment in August 2019, lessors and lessees are required to enter into a written lease contract, containing such provisions as the
term of the lease, the use of the premises, liability for rent and repair, and other rights and obligations of both parties. Both lessor and
lessee are also required to register the lease with the real estate administration department. Pursuant to implementing rules stipulated by
certain provinces or cities, such as Tianjin, if the lessor and lessee fail to go through the registration procedures, both lessor and lessee
may be subject to warnings, rectifications and/or other penalties. See “Item 3. Key Information — D. Risk Factors — Risks Related to
Our Business — Our lessors’ failure to comply with lease registration and other compliance requirements under PRC law may subject
these lessors or us to fines or other penalties that may negatively affect our ability to operate our hotels.”
According to the PRC Civil Code (which took effect on January 1, 2021 and replaced, among others, the PRC Contract Law and the
PRC Property Law), subject to consent of the lessor, the lessee may sublease the leased item to a third party. Where the lessee subleases
the lease item, the leasing contract between the lessee and the lessor remains valid. The lessor is entitled to terminate the contract if the
lessee subleases the lease item without the consent of the lessor. See “Item 3. Key Information — D. Risk Factors — Risks Related to
Our Business — The legal rights of our franchisees and us to use certain leased properties could be challenged by property owners or
other third parties, which could prevent our franchisees or us from operating the affected hotels or increase the costs associated with
operating these hotels.”
On December 1, 2010, the Ministry of Housing and Urban-Rural Development promulgated the Administrative Measures for
Commodity Housing Tenancy, which took effect on February 1, 2011. Under this regulation, a property may not be leased in some
circumstances, including if the designated use of the property is changed in violation of applicable regulations. This regulation further
provides that the competent real estate departments of the people’s governments of the municipalities directly under the central
government, cities and counties shall urge those who violate above provisions to make corrections within a specified time limit, and
impose a fine below RMB5,000 on those who have not obtained illegal income. A fine between three and five times the amount of illegal
income up to RMB30,000 may be imposed on those who have obtained illegal gains.
Pursuant to the PRC Civil Code, if the mortgaged property has been leased and transferred for occupation prior to the establishment
of the mortgage right, the original tenancy shall not be affected by such mortgage right. According to the Interpretation of the Supreme
People’s Court on Several Issues concerning the Application of Law in the Trial of Cases about Disputes Over Lease Contracts on Urban
Buildings (2020 version), which took effect on January 1, 2021, if the ownership of the leased premises changes during lessee’s
possession in accordance with the terms of the lease contract, and the lessee requests the assignee to continue to perform the original
lease contract, the PRC court shall support it, except that the mortgage right has been established before the lease of the leased premises
and the ownership changes due to the mortgagee’s realization of the mortgage right. See “Item 3. Key Information — D. Risk Factors —
Risks Related to Our Business — The legal rights of our franchisees and us to use certain leased properties could be challenged by
property owners or other third parties, which could prevent our franchisees or us from operating the affected hotels or increase the costs
associated with operating these hotels.”

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Regulations on Usage of Land or Property
The regulations governing the land or property usage mainly include the Land Administration Law of the People’s Republic of China
adopted by the Standing Committee of the National People’s Congress on June 25, 1986, and most recently amended on August 26,
2019, and the Regulations on the Implementation of the Land Administration Law of the People’s Republic of China promulgated
according to the Order of the State Council No. 256 on December 27, 1998 and further revised in accordance with the Decision of the
State Council on Revising Certain Administrative Regulations on July 29, 2014 and September 1, 2021.
According to the above regulations, as to state-owned land and land collectively-owned by farmers, construction entities shall use
such land, construction according to the stipulations of the land use right lease contract or according to the provisions of the approval
documents relevant to the allocation of land use rights. As for state-owned land, the conversion of the land to land used for construction
purposes shall receive the consent of the competent natural resources administrative departments of relevant people’s governments and
be submitted to the people’s governments that originally granted land use approval. When changing the purpose of land within urban
planning areas, consent shall be obtained from the relevant urban planning administration departments before submission; without such
approvals, the use of land specified in the relevant overall land utilization plan shall not be changed. Under these regulations, failure to
comply with the approved usage may subject the owners of such properties and/or the tenants to fines or other penalties, including
potentially being required to cease such non-compliant operations and being requested by the relevant land administrative authority to
return the land. If the land is not used in accordance with the approved land use purpose, the rural collective economic organization may
take back the land use rights upon approval by the People’s Government which has approved the land use previously.
Regulations on Consumer Protection
In October 1993, the SCNPC promulgated the Law on the Protection of the Rights and Interests of Consumers which has been
amended on October 25, 2013, or the Consumer Protection Law. Under the Consumer Protection Law, a business operator providing a
commodity or service to a consumer is subject to a number of requirements, including the following:
●
to ensure that commodities and services meet certain safety requirements;
●
to disclose serious defects of a commodity or a service and to adopt preventive measures against damage occurrence;
●
to provide consumers with accurate information and to refrain from conducting false advertising;
●
not to set unreasonable or unfair terms for consumers or alleviate or release itself from civil liability for harming the legal rights
and interests of consumers by means of standard contracts, circulars, announcements, shop notices or other means; and
●
not to insult or slander consumers or to search the person of, or articles carried by, a consumer or to infringe upon the personal
freedom of a consumer.
Business operators may be subject to civil liabilities for failing to fulfill the obligations discussed above. These liabilities include
restoring the consumer’s reputation, eliminating the adverse effects suffered by the consumer, and offering an apology and compensation
for any losses incurred. The following penalties may also be imposed upon business operators for the infraction of these obligations:
issuance of a warning, confiscation of any illegal income, imposition of a fine, an order to cease business operation, revocation of its
business license or imposition of criminal liabilities under circumstances that are specified in laws and statutory regulations.
On December 26, 2003, the PRC Supreme People’s Court published the Interpretation of Some Issues Concerning the Application of
Law for the Trial of Cases on Compensation for Personal Injury which took effect on May 1, 2004, was amended on December 29, 2020,
and was most recently revised on February 15, 2022. On May 8, 2020, the National People’s Congress of the PRC enacted the PRC Civil
Code, which became effective on July 1, 2021. The above interpretation and law further increase the liabilities of business operators
engaged in the operation of hotels, restaurants, or entertainment facilities and subject such operators to compensatory liabilities for
failing to fulfill their statutory obligations or to guarantee the personal safety of others.

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Regulations on Protection of Information on Networks
On December 28, 2012, SCNPC issued the Decision of the Standing Committee of the National People’s Congress on Strengthening
Information Protection on Networks, pursuant to which network service providers and other enterprises and institutions shall, when
gathering and using electronic personal information of citizens in business activities, publish their collection and use rules and adhere to
the principles of legality, rationality and necessarily, explicitly state the purposes, manners and scopes of collecting and using
information, and obtain the consent of those from whom information is collected, and shall not collect and use information in violation of
laws and regulations and the agreement between both sides; and the network service providers and other enterprises and institutions and
their personnel must strictly keep such information confidential and may not divulge, alter, damage, sell, or illegally provide others with
such information.
On July 16, 2013, the Ministry of Industry and Information Technology, or the MIIT, issued the Order for the Protection of
Telecommunication and Internet User Personal Information. The requirements under this order are stricter and wider compared to the
above decision issued by the National People’s Congress. According to this order, if a network service provider wishes to collect or use
personal information, it may do so only if such collection is necessary for the services it provides. Furthermore, it must disclose to its
users the purpose, method and scope of any such collection or usage, and must obtain consent from the users whose information is being
collected or used. Network service providers are also required to establish and publish their protocols relating to personal information
collection or usage, keep any collected information strictly confidential and take technological and other measures to maintain the
security of such information. Network service providers are required to cease any collection or usage of the relevant personal
information, and deregister the relevant user account, when a user stops using the relevant Internet service. Network service providers are
further prohibited from divulging, distorting or destroying any such personal information, or selling or providing such personal
information unlawfully to other parties. In addition, if a network service provider appoints an agent to undertake any marketing or
technical services that involve the collection or usage of personal information, the network service provider is required to supervise and
manage the protection of the information. The order states, in broad terms, that violators may face warnings, fines, public exposure and,
in the most severe cases, criminal liability.
On June 1, 2017, the Cybersecurity Law of the People’s Republic of China promulgated in November, 2016 by SCNPC became
effective. This law also absorbed and restated the principles and requirements mentioned in the aforesaid decision and order, and further
provides that, where an individual finds any network operator collects or uses his or her personal information in violation of the
provisions of any law, regulation or the agreement of both parties, the individual shall be entitled to request the network operator to
delete his or her personal information; if the individual finds that his or her personal information collected or stored by the network
operator has any error, he or she shall be entitled to request the network operator to make corrections, and the network operator shall take
measures to do so. Pursuant to this law, the violators may be subject to: (i) warning; (ii) confiscation of illegal gains and fines equal to
100% to 1,000% of the illegal gains; or if without illegal gains, fines up to RMB1,000,000; or (iii) an order to shut down the website,
suspend the business operation for rectification, or revoke business license. Besides, responsible persons may be subject to fines between
RMB10,000 and RMB100,000.
On November 28, 2019, the Secretary Bureau of the Cyberspace Administration of China, or CAC the General Office of the
Ministry of Industry and Information Technology, the General Office of the Ministry of Public Security and the General Office of the
SAMR promulgated the Identification Method of Illegal Collection and Use of Personal Information Through App, which provides
guidance for the regulatory authorities to identify the illegal collection and use of personal information through mobile apps, and for the
app operators to conduct self-examination and self-correction and for other participants to voluntarily monitor compliance. The Personal
Information Protection Law promulgated by the SCNPC on August 20, 2021 further strengthened the protection of personal information
and provides that no organization or individual may illegally collect, use, process or transmit the personal information of others, illegally
buy or sell, provide or make public the personal information of others, or engage in the handling of personal information that endangers
the national security or public interests.We have required our users to consent to our collecting and using their personal information, and
established information security systems to protect user’s privacy. Furthermore, pursuant to the PRC Civil Code, any organization or
individual shall legally obtain personal information of others when necessary and ensure the safety of such information, and shall not
illegally collect, use, process or transmit personal information of others, or illegally purchase or sell, provide or make public personal
information of others.

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Regulations Relating to Internet Content and Information Security
The Administrative Measures on Internet Information Services specifies that internet information services regarding news,
publications, education, medical and health care, pharmacy and medical devices, among other things, are to be examined, approved and
regulated by the relevant authorities. Internet information providers are prohibited from providing services beyond those included in the
scope of their ICP licenses or filings. Furthermore, these measures clearly specify a list of prohibited content. Internet information
providers are prohibited from producing, copying, publishing or distributing information that is humiliating or defamatory to others or
that infringes the lawful rights and interests of others. Internet information providers that violate the prohibition may face criminal
charges or administrative sanctions by the PRC authorities. Internet information providers must monitor and control the information
posted on their websites. If any prohibited content is found, they must remove the offending content immediately, keep a record of it and
report to the relevant authorities. Furthermore, in 2019, the CAC issued the Provisions on the Management of Network Information
Content Ecology, or the CAC Order No. 5, which became effective on March 1, 2020, to further strengthen the regulation and
management of network information content. Pursuant to the CAC Order No. 5, each network information content service platform is
required, among others, (i) not to disseminate any information prohibited by laws and regulations, such as information jeopardizing
national security; (ii) to strengthen the examination of advertisements published on such network information content service platform;
(iii) to promulgate management rules and platform convention and improve user agreement, such that such network information content
service platform could clarify users’ rights and obligations and perform management responsibilities required by laws, regulations,
rules and convention; (iv) to establish convenient means for complaints and reports; and (v) to prepare annual work report regarding its
management of network information content ecology. In addition, a network information content service platform must not, among
others, (i) utilize new technologies such as deep learning and virtual reality to engage in activities prohibited by laws and regulations;
(ii) engage in online traffic fraud, malicious traffic rerouting and other activities related to fraudulent account, illegal transaction account
or maneuver of users’ account; or (iii) infringe a third party’s legitimate rights or seek illegal interests by way of interfering with
information display. Internet information in China is also regulated and restricted from a national security standpoint. The SCNPC
enacted the Decisions on Maintaining Internet Security, which may subject violators to criminal punishment in China for any effort to:
(1) gain improper entry into a computer or system of strategic importance; (2) disseminate politically disruptive information; (3) leak
state secrets; (4) spread false commercial information; or (5) infringe intellectual property rights. The Ministry of Public Security has
promulgated measures that prohibit use of the internet in ways which, among other things, result in a leakage of state secrets or a spread
of socially destabilizing content. In addition, the Standing Committee of the National People’s Congress promulgated the Cyber Security
Law of the People’s Republic of China, or the Cyber Security Law, effective on June 1, 2017, to protect cyberspace security and order.
Pursuant to the Cyber Security Law, any individual or organization using the network must comply with the constitution and the
applicable laws, follow the public order and respect social moralities, and must not endanger cyber security, or engage in activities by
making use of the network that endanger the national security, honor and interests, or infringe on the fame, privacy, intellectual property
and other legitimate rights and interests of others. The Cyber Security Law sets forth various security protection obligations for network
operators, which are defined as “owners and administrators of networks and network service providers”, including, among others,
complying with a series of requirements of tiered cyber protection systems; verifying users’ real identity; localizing the personal
information and important data gathered and produced by key information infrastructure operators during operations within the PRC
(where such information and data have to be provided abroad for business purpose, subject to applicable laws and regulations, security
assessment shall be conducted); and providing assistance and support to government authorities where necessary for protecting national
security and investigating crimes.
Regulations on Environmental Protection
On February 29, 2012, the SCNPC issued the amended Law on Promoting Clean Production, which regulates service enterprises
such as restaurants, entertainment establishments and hotels and requires them to use technologies and equipment that conserve energy
and water, serve other environmental protection purposes, and reduce or stop the use of consumer goods that waste resources or pollute
the environment.

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According to the Environmental Protection Law of the People’s Republic of China promulgated by the SCNPC on December 26,
1989 and amended on April 24, 2014 and the Environmental Impact Assessment Law of the People’s Republic of China promulgated by
the SCNPC on October 28, 2002 and most recently amended on December 29, 2018, respectively, the Regulations Governing
Environmental Protection in Construction Projects promulgated by the State Council on November 29, 1998 and amended on July 16,
2017, hotels shall submit a Report on Environmental Impact Assessment and an Application Letter for Acceptance of Environmental
Protection Facilities in Construction Projects to competent environmental protection authorities for approvals before commencing the
operation. Pursuant to the Environmental Impact Assessment Law of the People’s Republic of China, any hotel failing to obtain the
approval of an Environmental Impact Assessment may be ordered to cease construction, pay a fine of not less than 1% but not more than
5% of the total investment of the construction project on it, and be ordered restore to the original state, and the person directly
responsible for the project may be subject to certain administrative penalties.
The Law of the People’s Republic of China on the Prevention and Control of Water Pollution first became effective on November 1,
1984 and was most recently amended on June 27, 2017. The law applies to the prevention and control of pollution of rivers, lakes,
canals, irrigation channels, reservoirs and other surface water bodies and groundwater within the PRC. According to the provisions of
this Law and other relevant laws and regulations of the PRC, the Ministry of Environmental Protection and its local counterparts at or
above county level shall take charge of the administration and supervision on the matters of prevention and control of water pollution.
The Law of the People’s Republic of China on the Prevention and Control of Water Pollution provides that environmental impact
assessment should be conducted in accordance with the relevant laws and regulations for new construction projects and expansion or
reconstruction projects and other facilities on water that directly or indirectly discharge pollutants to water bodies. Facilities for the
prevention and control of water pollution at a construction project shall be designed, built and put into use along with the main structure
of the construction project. The construction project shall only be used after facilities for the prevention and control of water pollution
pass the inspection and acceptance by the Ministry of Environmental Protection and its competent local counterparts. Dismantling or
putting off operation of such installations shall be subject to prior approval of the local counterpart of the Ministry of Environmental
Protection at or above the county level.
Regulations on Commercial Franchising
Franchise operations are subject to the supervision and administration of the MOC, and its regional counterparts. Such activities are
currently regulated by the Regulations on the Administration of Commercial Franchising promulgated by the State Council on
February 6, 2007, effective as of May 1, 2007. The Regulations on the Administration of Commercial Franchising were supplemented by
the new Administrative Measures for Archival Filing of Commercial Franchises which were issued by the MOC on December 12, 2011
and took effect on February 1, 2012 and the new Administrative Measures for Information Disclosure of Commercial Franchises which
were issued by the MOC on February 23, 2012 and took effect on April 1, 2012.
Under the above applicable regulations, a franchisor must have certain prerequisites including a mature business model, the
capability to provide long-term business guidance, technical support and training services to franchisees and ownership of at least two
directly-managed storefronts that have been in operation for at least one year within China. Franchisors engaged in franchising activities
without satisfying the above requirements may be subject to penalties such as forfeit of illegal income and imposition of fines between
RMB100,000 and RMB500,000 and may be bulletined by the MOC or its local counterparts. Franchise contracts shall include certain
required provisions, such as terms, termination rights and payments.
A franchisor is required to file its business license, sample franchise agreement and other documents to the provincial commerce
authority where it is registered for record within fifteen days following the execution of its first franchise agreement with a franchisee
inside the PRC. If the franchisor conducts franchise business in two or more municipalities, provinces or autonomous regions, it is
required to file with the Ministry of Commerce. Franchisors who comply with the provisions of the above applicable regulations shall, in
accordance with the law, make filing through commercial franchise information management system established by the Ministry of
Commerce. Moreover, the franchisor shall file information regarding the execution, withdrawal, renewal of and amendment to franchise
agreements to the commerce authority for record before March 31 of each year.
Certain changes in the recorded information of the franchisor should also be filed with the relevant commerce authority within
thirty days following the occurrence of these changes. For a franchisor failing to file in accordance with these regulations, the relevant
commerce authority may order it to comply within a designated time frame and impose a fine ranging from RMB10,000 to RMB50,000.
If the franchisor fails to comply as ordered, the relevant commerce authority may impose another fine ranging from RMB50,000 to
RMB100,000 and publicly announce the franchisor’s violation.

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The term of a franchise contract shall be no less than three years unless otherwise agreed by franchisees. The franchisee is entitled to
terminate the franchise contract at his sole discretion within a set period of time upon signing the franchise contract.
Pursuant to the Administrative Measures for Information Disclosure of Commercial Franchises, 30 days prior to the execution of
franchise contracts, franchisors are required to provide franchisees with copies of the franchise contracts, as well as written true and
accurate basic information on matters including:
●
the name, domiciles, legal representative, registered capital, scope of business and basic information relating to its commercial
franchising;
●
basic information relating to the registered trademark, logo, patent, know-how and business model;
●
the type, amount and method of payment of franchise fees (including payment of deposit and the conditions and method of
refund of deposit);
●
the price and conditions for the franchisor to provide goods, service and equipment to the franchisee;
●
the detailed plan, provision and implementation plan of consistent quality services including operational guidance, technical
support and business training provided to the franchisee;
●
detailed measures for guiding and supervising the operation of the franchisor, including certain of operational guidance, method
of provision and implementation plan, including site selection, fitting out and decoration, store management, advertising
promotions and product configuration; division of liabilities between the franchiser and the franchisee in respect of the handling
of customer complaints and remediation thereof, etc.;
●
investment budget for all franchised hotels of the franchisee;
●
the current numbers, territory and operation evaluation of the franchisors within China;
●
a summary of accounting statements audited by an accounting firm and a summary of audit reports for the previous two years;
●
information on any lawsuit in which the franchisor has been involved in the previous five years;
●
basic information regarding whether the franchisor and its legal representative have any record of material violation; and
●
other information required to be disclosed by the MOC.
In the event of failure to disclose or misrepresentation, the franchisee may terminate the franchise contract and the franchisor may be
fined up to RMB300,000. In addition, such non-compliance may be bulletined.
According to the 2008 Handbook of Market Access of Foreign Investment promulgated by the MOC in December 2008, if an
existing foreign-invested company wishes to operate a franchise in China, it must apply to its original examination and approval
authority to expand its business scope to include “engaging in commercial activities by way of franchise.”
Regulations on Intellectual Property Rights
The PRC has adopted comprehensive legislation governing intellectual property rights, including copyrights, patents, trademarks
and domain names.
Copyright. Copyright in the PRC, including copyrighted software, is principally protected under the Copyright Law and related
rules and regulations. Under the Copyright Law, the term of protection for copyrighted software is 50 years.

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Trademark. The PRC Trademark Law and its implementation rules protect registered trademarks. The PRC Trademark Law has
adopted a “first-to-file” principle with respect to trademark registration. The National Intellectual Property Administration, or the
Trademark Office, is responsible for the registration and administration of trademarks throughout the PRC and grants a term of ten years
to registered trademarks and another ten years if requested upon expiry of the initial or extended term. Trademark license agreements
must be filed with the Trademark Office for record.
Patent. Pursuant to the PRC Patent Law and its implementation rules, once a patent for an invention, utility model has been granted,
unless otherwise provided by the Patent Law, no entity or individual may use the patent, patented product or patented process for
production or business purposes without the authorization of the patent owner. Once a patent has been granted for a design, no entity or
individual may manufacture, sell or import any product containing the patented design without the permission of the patent owner. If a
patent is found to have been infringed, the infringer must, in accordance with relevant regulations, cease such infringement, take
remedial action and pay damages.
Domain Name. Domain names are protected under the Administrative Measures on the China Internet Domain Names promulgated
by the MIIT in 2004, which will be replaced by the Administrative Measures on the Internet Domain Names effective on November 1,
2017. The MIIT is the major regulatory authority responsible for the administration of the PRC Internet domain names. The registration
of domain names in PRC is on a “first-apply-first-registration” basis. A domain name applicant will become the domain name holder
upon the completion of the application procedure.
Regulations on Internet Information Services
The Telecommunications Regulations of the People’s Republic of China (Revised in 2016) which took effect on February 6, 2016
and the Administrative Measures for Internet Information Services (Revised in 2011) which took effect on January 8, 2011 provide that
anyone wishing to engage in the provision of commercial internet information services shall apply to the telecommunications
administration authority of the province, autonomous region or municipality directly under the Central Government or the State
Council’s department in charge of the information industry for an operating permit for value-added telecommunications services of
internet information services.
In July 2006, the Ministry of Information Industry, the predecessor of the Ministry of Industry and Information Technology, or the
MIIT, issued the Circular on Strengthening the Administration of Foreign Investment in the Operation of Value-added
Telecommunications Business, pursuant to which a PRC domestic company that holds an operating license for value-added
telecommunications business, which we refer to as an ICP License, is prohibited from leasing, transferring or selling the ICP License to
foreign investors in any form and from providing any assistance, including resources, sites or facilities, to foreign investors that conduct
a value-added telecommunications business illegally in the PRC. Further, the domain names and registered trademarks used by an
operating company providing value-added telecommunications services must be legally owned by that company or its shareholders. In
addition, the company’s operational premises and equipment must comply with the approved coverage region on its ICP License, and the
company must establish and improve its internal internet and information security policies and standards and emergency management
procedures. If an ICP License holder fails to comply with the requirements and also fails to remedy such non-compliance within a
specified period of time, the MIIT or its local counterparts have the discretion to take administrative measures against the license holder,
including revoking its ICP license. If anyone operates telecommunications business without authorization or beyond its scope of
business, the State Council’s department in charge of the information industry or the telecommunications administration authority of the
province, autonomous region or municipality directly under the central government shall, ex officio, order rectification of the matter,
confiscate the illegal income and impose a fine of up to five times the amount illegal income; if there is no illegal income or if the illegal
income is less than RMB50,000, a fine of not less than RMB100,000 and not more than RMB1 million shall be imposed; if the case is
serious, the perpetrator shall be ordered to suspend operations and undergo rectification.

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On June 10, 2021, National People’s Congress of the People’s Republic of China adopted the Data Security Law of the PRC, is
hereby promulgated, effective September 1, 2021. The Data Security Act requires data processing in a lawful and appropriate manner,
including the collection, storage, use, processing, transmission, provision and disclosure of data. The Data Security Act sets out data
security and privacy obligations for entities and individuals conducting data processing activities. Moreover, data classification and
grading protection system has been introduced. Under the Act of Data Security, processors of important data need to conduct risk
assessments for their data processing activities, and submit risk assessment reports to relevant authorities. National core data (that is, data
related to national security, the lifeline of the national economy, important people’s livelihood and major public interests) should be
subject to a stricter management system. In addition, the Data Security Act provides for national security review procedures for data
processing activities that affect or may affect national security and imposes export controls on certain data and information. Furthermore,
the Data Security Act stipulates that without the approval of the competent authorities of the Chinese government, any organization or
individual in China shall not provide any data stored in China to any foreign judicial and law enforcement agencies.
On August 20, 2021, the SCNPC of the People’s Republic of China promulgated the Personal Information Protection Law, which
stipulates personal information rights and privacy protection, and takes effect on November 1, 2021. The Personal Information Protection
Law stipulates protection requirements for handling personal information, including but not limited to the collection, storage, use,
processing, transmission, provision, disclosure, and deletion of personal information. And many of its specific requirements remain to be
clarified in practice by the Cyberspace Administration of China, other regulators and Chinese courts. We may need to further adjust our
business practices to comply with personal information protection laws and regulations (including the Personal Information Protection
Act).
On December 28, 2021, the Cyberspace Administration of China promulgated the “Measures for Cybersecurity Review”, which
became effective on February 15, 2022. According to the Cybersecurity Review Measures and other Chinese cybersecurity laws and
regulations and draft measures, critical information infrastructure operators planning to purchase network products and services that
affect or may affect national security must undergo cybersecurity review by the Cyberspace Administration of China. In addition, the
measures stipulate that data processors that carry out data processing activities that affect or may affect national security are also subject
to cybersecurity review. The measure further stipulates that if an operator has the personal information of more than 1 million users and
plans to list it abroad, it must undergo a cybersecurity review.
On July 7, 2022, the Cyberspace Administration of China promulgated the Measures for Security Assessment of Data Exports,
which became effective on September 1, 2022, and which stipulates that important data collected and generated during operations in
China to be provided overseas and security assessments should be conducted in accordance with the law. Data processors of personal
information should conduct security assessments. The Measures approach further specifies the procedures and requirements for safety
assessment. The Measures have clarified four situations in which data export security assessment should be declared: (i) data processors
provide important data abroad; (ii) key information infrastructure operators and data processors that process personal information of
more than 1 million individual provide personal information overseas; (iii) since January 1, 2021, data processors who have provided
personal information of 100,000 individual or sensitive personal information of 10,000 individual overseas have provided personal
information overseas; (iv) other situations that require declaration of data export security assessment as stipulated by the Cyberspace
Administration of China. The Measures clarify that data processors who violate the provisions of these Measures shall be dealt with in
accordance with the provisions of the Cyber Security Law of the PRC, the Data Security Law of the PRC, the Personal Information
Protection Law of the PRC and other laws and regulations; if a crime is constituted, criminal responsibility shall be investigated
according to law.

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On November 14, 2021, the Cyberspace Administration of China promulgated the Regulations on the Administration of Network
Data Security (Draft for Comment), which further regulates Internet data processing activities, emphasizes the supervision and
management of network data security, and further stipulates the obligations of Internet platform operators, such as establishing data-
related platform rules, privacy policies and algorithm policy disclosure systems. Specifically, the Regulations (Draft for Comment)
require data processors, including, (1) to take immediate remedial measures when they discover that the network products and services
they use or provide have security deficiencies and vulnerabilities, or threaten national security or endanger the public interest; and (2) to
follow a series of detailed requirements in processing personal information, managing important data and intending to provide data
overseas. In addition, the Regulations (Draft for Comment) require that data processors that process important data or data processors
that go public overseas complete an annual data security assessment and submit a data security assessment report to the relevant
regulatory authority. As required by the Regulations (Draft for Comment), such annual assessments include, but are not limited to, the
processing of important data, the findings of Data security risks and disposal measures, effectiveness of data protection measures,
implementation of national data security laws and regulations, data security incidents that have occurred and their disposal, and security
assessments related to sharing and providing important data overseas. As of December 31, 2022 the Regulations (Draft for Comment) are
for public comment only and have not been formally adopted. Final terms and the timeline for their adoption are subject to change and
uncertainty.
Regulations on Foreign Currency Exchange
The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations
promulgated by the State Council, as amended on August 5, 2008, or the Foreign Exchange Regulations. Under the Foreign Exchange
Regulations, the payments of current account items, such as profit distributions, interest payments and trade and service-related foreign
exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural
requirements. By contrast, approval from or registration with appropriate government authorities is required where RMB is to be
converted into foreign currency and remitted out of China to pay capital account items, such as direct investments, repayment of foreign
currency-denominated loans, repatriation of investments and investments in securities outside of China.
On February 13, 2015, the SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign
Exchange Concerning Direct Investment, or SAFE Notice 13. After SAFE Notice 13 became effective on June 1, 2015, instead of
applying for approvals regarding foreign exchange registrations of foreign direct investment and overseas direct investment from SAFE,
entities and individuals will be required to apply for such foreign exchange registrations from qualified banks. The qualified banks, under
the supervision of the SAFE, will directly examine the applications and conduct the registration.
On March 30, 2015, the SAFE promulgated Notice of the State Administration of Foreign Exchange on Reforming the Mode of
Management of Settlement of Foreign Exchange Capital of Foreign-Funded Enterprises, or SAFE Circular 19, to expand the reform
nationwide. Circular 19 allows foreign-invested enterprises to make equity investments by using RMB fund converted from foreign
exchange capital. Under Circular 19, the foreign exchange capital in the capital account of foreign-invested enterprises upon the
confirmation of rights and interests of monetary contribution by the local foreign exchange bureau (or the book-entry registration of
monetary contribution by the banks) can be settled at the banks based on the actual operation needs of the enterprises. The proportion of
discretionary settlement of foreign exchange capital of foreign-invested enterprises is currently 100%. SAFE can adjust such proportion
in due time based on the circumstances of international balance of payments. However, Circular 19 and another circular promulgated by
SAFE in June 2016, Notice of the State Administration of Foreign Exchange on Reforming and Regulating the Policies for the
Administration of Foreign Exchange Settlement under the Capital Account, or SAFE Circular 16, continues to, prohibit foreign-invested
enterprises from, among other things, using RMB fund converted from its foreign exchange capitals for expenditure beyond its business
scope, investment and financing (except for security investment or guarantee products issued by bank), providing loans to non-affiliated
enterprises or constructing or purchasing real estate not for self-use. See “Item 3. Key Information — D. Risk Factors — Risks Related
to Doing Business in China — PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay
or prevent us from using the proceeds of our offerings to make loans or additional capital contributions to our PRC subsidiaries which
would materially and adversely affect our liquidity and our ability to fund and expand our business.”

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In October 2019, the SAFE promulgated the Notice for Further Advancing the Facilitation of Cross-border Trade and Investment, or
the SAFE Circular 28, which, among other things, allows all foreign invested enterprises to use Renminbi converted from foreign
currency denominated capital for equity investments in China, as long as the equity investment is genuine, does not violate applicable
laws, and complies with the negative list on foreign investment. The Circular Regarding Further Optimizing the Cross-border RMB
Policy to Support the Stabilization of Foreign Trade and Foreign Investment jointly promulgated by the People’s Bank of China, NDRC,
MOFCOM, the State-owned Assets Supervision and Administration Commission of the State Council, the China Banking and Insurance
Regulatory Commission and SAFE on December 31, 2020 and effective on February 4, 2021 allows the noninvestment foreign-invested
enterprises to make domestic reinvestment with RMB capital in accordance with the law on the premise that they comply with prevailing
regulations and the invested projects in China are authentic and compliant. In addition, if a foreign-invested enterprise uses RMB income
under capital accounts to conduct domestic reinvestment, the invested enterprise is not required to open a special deposit account for
RMB capital. According to the Circular of the State Administration for Foreign Exchange on Optimizing Foreign Exchange
Administration to Support the Development of Foreign-related Business, or the SAFE Circular 8 promulgated and effective on April 10,
2020 by the SAFE, the reform of facilitating the payments of incomes under the capital accounts shall be promoted nationwide. Under
the prerequisite of ensuring true and compliant use of funds and compliance and complying with the prevailing administrative provisions
on use of income from capital projects, enterprises which satisfy the criteria are allowed to use income under the capital account, such as
capital funds, foreign debt and overseas listing, etc., for domestic payment, without the need to provide proof materials for veracity to the
bank beforehand for each transaction.
Under the Foreign Investment Law, foreign investors may freely remit into or out of China, in Renminbi or any other foreign
currency, their capital contributions, profits, capital gains, income from asset disposal, intellectual property royalties, lawfully acquired
compensation, indemnity or liquidation income and so on within the territory of China.
Regulations on Employee Stock Incentive Plans of Overseas Publicly-Listed Company
In December 2006, the People’s Bank of China promulgated the Administrative Measures of Foreign Exchange Matters for
Individuals, which set forth the respective requirements for foreign exchange transactions by individuals (both PRC or non-PRC citizens)
under either the current account or the capital account. In January 2007, the State Administration of Foreign Exchange issued
implementing rules for the Administrative Measures of Foreign Exchange Matters for Individuals which, among other things, specified
approval requirements for certain capital account transactions such as a PRC citizen’s participation in the employee stock ownership
plans or stock option plans of an overseas publicly listed company.
On February 25, 2012, the State Administration of Foreign Exchange promulgated the Circulars on Issues concerning the Foreign
Exchange Administration for Domestic Individuals Participating in Equity Incentive Plans of Overseas-Listed Company, or the Stock
Option Rules. Under this rule, PRC citizens or non-PRC citizens who reside in China for a continuous period of not less than one year,
who participate in an equity incentive plan of an overseas publicly listed company are required to register, through our PRC Subsidiary,
collectively entrust a domestic agency, or the “Domestic Agency”, to handle issues like foreign exchange registration, account
establishment, funds transfer and remittance, and entrust an overseas institution, or the “Overseas Trustee” to handle issues like exercise
of options, purchase and sale of corresponding stocks or equity and transfer of corresponding funds. A “Domestic Agency” shall be a
domestic company participating in the equity incentive plan or a domestic institution which is qualified for asset custody business as
chosen by us according to PRC law. We and our executive officers and other employees who are PRC citizens or non-PRC citizens who
reside in China for a continuous period of not less than one year and have been granted options have been subject to these regulations
since the completion of our initial public offering. Failure by these individuals to complete their SAFE registrations may subject us and
them to fines and other legal sanctions. See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China —
Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option
plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.”
The STA has issued certain circulars concerning employee share options and restricted shares. Under these circulars, our employees
working in China who exercise share options will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file
documents related to employee share options with relevant tax authorities and to withhold individual income taxes of those employees
who exercise their share options. If our employees fail to pay or we fail to withhold their income taxes according to relevant laws and
regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities.

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Further, a notice concerning the individual income tax on earnings from employee share options jointly issued by the Ministry of
Finance, or the MOF, and SAT, on March 28, 2005, and its implementing rules, provide that domestic companies that implement
employee share option programs shall (a) file the employee share option plans and other relevant documents to the local tax authorities
having jurisdiction over them before implementing such employee share option plans; (b) file share option exercise notices and other
relevant documents with the local tax authorities having jurisdiction over them before exercising by the employees of the share options,
and clarify whether the shares issuable under the employee share options mentioned in the notice are the shares of publicly listed
companies; and (c) withhold taxes from the PRC employees in connection with the PRC individual income tax.
Regulations on Share Capital
Under the newly promulgated Foreign Investment Law, a foreign-invested company are treated as a domestic company and the
shareholders of the foreign-invested company are no longer subject to make timely contribution to the registered capital of the foreign-
invested company. The shareholders can make their capital contributions in cash or in kind, including in the forms of contributions of
intellectual property rights or land use rights that can be valued and is transferable.
Regulations on Dividend Distribution
The principal regulation governing distribution of dividends of foreign-invested enterprises is the Corporate Law, as most recently
amended on October 26, 2018.
Under the Corporate Law, foreign-invested enterprises in China may pay dividends only out of their accumulated after-tax profits, if
any, determined in accordance with PRC accounting standards and regulations. In addition, foreign-invested enterprises in China are
required to allocate at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds unless these
reserves have reached 50% of the registered capital of the enterprises. Furthermore, foreign-owned companies may, at their discretion,
allocate a portion of their after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserves are not
distributable as cash dividends.
Regulations on Prepaid Cards
On August 18, 2016, the MOC promulgated Administrative Measures on Single-purpose Commercial Prepaid Cards (Trial
Implementation). According to these administrative measures, corporate legal entities engaged in the retail, accommodation and catering,
or residential services industries issuing prepaid cards shall complete filling formalities within 30 days from the date on which they
engage in the single-purpose card businesses. The administrative measures classify different types of issuers of single-purpose cards,
including issuers of group cards, branded cards and issuers of cards on a large scale. Each company engaging in the single-purpose card
business shall be classified as one of the foregoing types of prepaid card business in which they are engaged. In addition, these
administrative measures also stipulate rules for the card purchase agreement, patterns of cards, limits of each registered and
nonregistered card, use of prepaid monies, a minimum ratio of balances of prepaid monies to the company’s main business income in the
preceding accounting year, the company’s depositary system and the designated proportion of deposited funds or guarantee insurance
amounts to the balance of prepaid monies in the previous quarter, prepaid money management system and polices and so on. Companies
may be subject to administrative punishments, orders to correct any instances of non-compliance within a stipulated period, as well as a
fine ranging from RMB10,000 to RMB30,000 for any violation of these administrative measures.

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Regulations on Offshore Financing
SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore
Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, on July 4, 2014, which
replaced the former circular commonly known as “SAFE Circular 75” promulgated by SAFE on October 21, 2005. SAFE Circular 37
requires PRC residents to register with local branches of SAFE in connection with their direct establishment or indirect control of an
offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in
domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle.” SAFE Circular 37
further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as
increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In
the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC
subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying
out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute
additional capital into its PRC subsidiary. Moreover, failure to comply with the various SAFE registration requirements described above
could result in liability under PRC law for evasion of foreign exchange controls. According to the Notice on Further Simplifying and
Improving Policies for the Foreign Exchange Administration of Direct Investment released on February 13, 2015 by SAFE, from June 1,
2015 local banks will examine and handle foreign exchange registration for overseas direct investment, including the initial foreign
exchange registration and amendment registration, under SAFE Circular 37 from.
The Company has confirmed that none of the holders or beneficiary owners of the Company is PRC residents. Nevertheless, we may
not be aware of the identities of all of our beneficial owners.
Regulations on Overseas Listing
On August 8, 2006, six PRC regulatory agencies, namely the MOC, the State Assets Supervision and Administration Commission,
the State Administration of Taxation, the SAIC, the China Securities Regulatory Commission, or the CSRC, and the SAFE, jointly
adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the New M&A Rule, which
became effective on September 8, 2006. This New M&A Rule, as amended on June 22, 2009, purports, among other things, to require
offshore special purpose vehicles, or SPVs, formed for overseas listing purposes through acquisitions of PRC domestic companies and
controlled by PRC companies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas
stock exchange. On September 21, 2006, the CSRC published a notice on its official website specifying documents and materials
required to be submitted to it by SPVs seeking the CSRC approval of their overseas listings.
On December 14, 2006, the CSRC published on its official website procedures regarding its approval of overseas listings by SPVs.
The CSRC approval procedures require the filing of a number of documents with the CSRC and the approval process takes
several months to complete.
Regulations on Securities
The PRC Securities Law, which became effective on March 1, 2020, stipulates that overseas securities regulatory authorities shall
not carry out investigation and evidence collection directly in the People’s Republic of China. Without the consent of the securities
regulatory authority of the State Council and the relevant State Council department(s), no organization or individual may provide the
documents and materials relating to securities business activities to overseas parties arbitrarily.
Regulations Relating to Employment
The PRC National People’s Congress promulgated the Labor Contract Law which became effective on January 1, 2008 and was
amended on December 28, 2012, and the State Council promulgated implementing rules for the labor contract law on September 18,
2008. The labor contract law and the implementing rules impose requirements concerning, among others, the execution of written
contracts between employers and employees, the time limits for probationary periods, and the length of employment contracts. Also,
under the labor contract law an employer is not permitted to establish staffing companies to place workers with themselves or their
subsidiaries, and no enterprises is permitted to provide work placement business without obtaining a work placement license, for an
enterprise that acts in violation of such provisions, the labor administrative department shall order it to stop the illegal act, confiscate all
illegal gains, if there is no illegal gain, a fine of not more than RMB50,000 shall be imposed.

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On July 5, 1994, the SCNPC promulgated the Labor Law of the People’s Republic of China, or the Labor Law, which became
effective on January 1, 1995, and amended them on August 27, 2009 and December 29, 2018. In accordance with the Labor Law, a labor
contract shall be concluded for establishment of work relationships. On August 4, 1995, the Ministry of Labor (currently known as
Ministry of Human Resources and Social Security), promulgated the Opinions on Several Issues concerning the Implementation of the
Labor Law of the People’s Republic of China, or the Opinions. Under the Opinions, employers shall sign labor contracts with their
personnel who are borrowed by other employers for a long time, or personnel who receive education with wages or other off-the-job
personnel who still maintain labor relations with them. However, during the period of borrowing or going to school, certain relevant
clauses in the labor contract may be modified upon negotiation by both parties; and if the employees dispatched to equity joint ventures
and shareholding entities still maintain labor relations with their original employer, they shall conclude labor contracts with their original
employer. When the original employer concludes service contracts with the equity joint ventures and shareholding entities in regard to
the relevant contents of labor contracts, it may clarify the wage, insurances, welfare, holidays and other relevant treatment to the
employees.
On October 28, 2010, the National People’s Congress of China promulgated the PRC Social Insurance Law, which became effective
on July 1, 2011 and was amended on December 29, 2018. In accordance with the PRC Social Insurance Law and other relevant laws and
regulations, enterprises in China are required by PRC laws and regulations to participate in certain employee benefit plans, including
social insurance funds, namely a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury
insurance plan, a maternity insurance plan, a housing provident fund, and a handicapped employment security fund, and contribute to the
plans or funds in amounts equal to certain percentages of salaries, including bonuses and allowances, of the employees as specified by
the local government from time to time at locations where they operate their businesses or where they are located. According to the
Social Insurance Law, an employer that fails to make social insurance contributions may be ordered to rectify the non-compliance and
pay the required contributions within a stipulated deadline and be subject to a late fee of up to 0.05% per day. If the employer still fails to
rectify the failure to make social insurance contributions within the stipulated deadline, it may be subject to a fine ranging from one to
three times the amount overdue. In addition, the PRC Individual Income Tax Law requires companies operating in China to withhold
individual income tax on employees’ salaries based on the actual salary of each employee upon payment.
Under the Foreign Investment Law, foreign-funded enterprise engaging in production or operation activities shall comply with the
provisions on labor protection and social insurance in laws and administrative regulations, handle the tax, accounting, foreign exchange
and other matters according to the relevant laws, administrative regulations and relevant provisions of the State, and accept supervision
and inspection by relevant competent departments.
Regulations Relating to Tax
Income Tax and Withholding Tax
The EIT Law applies a uniform 25% enterprise income tax rate to PRC resident enterprises, including both foreign-invested
enterprises and domestic enterprises. The EIT Law imposes an enterprise income tax of 10% on dividends distributed by a foreign-
invested enterprise to its immediate holding company outside of China, if such immediate holding company is considered a “non-resident
enterprise” without any establishment or place within China or if the received dividends have no connection with the establishment or
place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a
tax treaty with China that provides for a different withholding tax rate. Pursuant to the Arrangement between the Mainland of China and
the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect
to Taxes on Income, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong company which
directly holds at least 25% equity interest in the PRC enterprise is reduced to 5% from a standard rate of 10%. Pursuant to the Notice of
the State Taxation Administration on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81, if
the relevant PRC tax authorities determine, in their sole discretion, that a company benefits from such reduced income tax rate due to a
structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment. As such, holding
companies in Hong Kong, for example, are subject to a 5% withholding tax rate if the holding companies directly hold no less than 25%
equity interest in the PRC enterprise and are the beneficial owners of the dividends. The Cayman Islands, where we are incorporated,
does not have such a tax treaty with China. Thus, dividends paid to us by our subsidiaries in China may be subject to the 10%
withholding tax if we are considered a “non-resident enterprise” under the EIT Law.

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The EIT Law provides that enterprises established outside of China whose “de facto management bodies” are located in China are
considered “resident enterprises.” The “de facto management body” is defined as the organizational body that effectively exercises
overall management and control over production and business operations, personnel, finance and accounting, and properties of the
enterprise. Currently, there are no detailed rules or precedents governing the procedures and specific criteria for determining “de facto
management body”. STA issued the Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as
PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or Circular 82, on April 22, 2009. According to STA
Circular 82, a Chinese-controlled offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a “de facto
management body” in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following
criteria are met: (a) the primary location of the day-to-day operational management is in China; (b) decisions relating to the enterprise’s
financial and human resource matters are made or are subject to approval by organizations or personnel in China; (c) the enterprise’s
primary assets, accounting books and records, company seals, and board and shareholders meeting minutes are located or maintained in
China; and (d) 50% or more of voting board members or senior executives habitually reside in China. In addition, the STA issued the
Administrative Measures on Income Taxes of Chinese-controlled Offshore Incorporated Resident Enterprises (Trial Implementation), or
Tax Trial Measures, on July 27, 2011, and effective on September 1, 2011 and amended in 2017, providing more guidance on the
implementation of Circular 82. Both Circular 82 and the Tax Trial Measures apply only to offshore enterprises controlled by PRC
enterprises or PRC enterprise groups and are not applicable to our case. But determining criteria set forth in Circular 82 and the Tax Trial
Measures may reflect the STA’s general position on how the “de facto management body” test should be applied in determining the tax
resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises or PRC enterprise groups or by PRC
or foreign individuals.
The STA issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Nonresident
Enterprises, or STA Public Notice 7, on February 3, 2015, which replaced or supplemented certain previous rules under the Circular on
Strengthening Administration of Enterprise Income Tax for Share Transfers by Nonresident Enterprises, or STA Circular 698.
Under STA Public Notice 7, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC
resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a
reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result,
gains derived from such indirect transfer may be subject to PRC enterprise income tax. According to STA Public Notice 7, “PRC taxable
assets” include assets attributed to an establishment in China, immovable properties in China, and equity investments in PRC resident
enterprises. In respect of an indirect offshore transfer of assets of a PRC establishment, the relevant gain is to be regarded as effectively
connected with the PRC establishment and therefore included in its enterprise income tax filing, and would consequently be subject to
PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immovable properties in China or to equity
investments in a PRC resident enterprise, which is not effectively connected to a PRC establishment of a non-resident enterprise, a PRC
enterprise income tax at 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar
arrangements, and the party who is obligated to make the transfer payments has the withholding obligation. There is uncertainty as to the
implementation details of STA Public Notice 7. If STA Public Notice 7 was determined by the tax authorities to be applicable to some of
our transactions involving PRC taxable assets, our offshore subsidiaries conducting the relevant transactions might be required to spend
valuable resources to comply with STA Public Notice 7 or to establish that the relevant transactions should not be taxed under STA
Public Notice 7. See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China — It is unclear whether
we will be considered as a PRC “resident enterprise” under the Enterprise Income Tax Law of the PRC, and depending on the
determination of our PRC “resident enterprise” status, dividends paid to us by our PRC subsidiaries may be subject to PRC withholding
tax, we may be subject to 25% PRC income tax on our worldwide income, and holders of our ADSs may be subject to PRC withholding
tax on dividends on, and gains realized on their transfer of, our ADSs.”
Under the EIT Law, enterprises qualified as “High New Technology Enterprises,” or HNTEs, enjoy a preferential income tax rate of
15%, rather than the uniform income tax rate of 25% which otherwise would apply. Shanghai Evergreen Technology Co., Ltd. has
qualified as an HNTE for the period of 2017 until now under the EIT Law, and has been subject to the preferential income tax rate of
15% during such period.
On October 17, 2017, the STA issued a Public Notice of the State Administration of Taxation on Matters Concerning Withholding of
Income Tax of Non-resident Enterprises at Source, or STA Public Notice 37. This STA Public Notice 37 has entered into force as of
December 1, 2017, according to which, STA Circular 698 has been abolished from December 1, 2017.

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Under the STA Public Notice 37 and other applicable PRC laws, the withholding agent (for example, payers of PRC-sourced income
to non-PRC residents) is obligated to withhold PRC income taxes from the payment. The withholding agent shall, within seven days of
the day on which the withholding obligation occurs, declare and remit the withholding tax to the competent tax authority at its locality.
The withholding agent shall establish account books for all tax it has withheld and remitted on a commission basis and archive relevant
contractual documents, so as to record the exact information about the enterprise income withheld and remitted for the non-resident
enterprise.
Although the withholding agents have the obligation to withhold relevant PRC taxes, in the event of a failure to withhold, the non-
PRC residents are still required to pay such taxes on their own. Failure to comply with the tax payment obligations by the non-PRC
residents will result in penalties, including full payment of taxes owed, fines and default interest on those taxes.
The STA issued the Announcement of State Taxation Administration on Promulgation of the Administrative Measures on Non-
resident Taxpayers Enjoying Treaty Benefits (“STA Circular 35”) on October 14, 2019, which became effective on January 1, 2020. The
STA Circular 35 further simplified the procedures for enjoying treaty benefits. According to the STA Circular 35, no approvals from the
tax authorities are required for a non-resident taxpayer to enjoy treaty benefits, and where a non-resident taxpayer self-assesses and
concludes that it satisfies the criteria for claiming treaty benefits, it may enjoy treaty benefits at the time of tax declaration or at the time
of withholding through the withholding agent, but it shall gather and retain the relevant materials as required for future inspection, and
accept follow-up administration by the tax authorities. There are also other conditions for enjoying the reduced withholding tax rate
according to other relevant tax rules and regulations. According to the Circular on Several Issues regarding the “Beneficial Owner” in
Tax Treaties, or Circular 9, which was issued on February 3, 2018 by the STA, effective as of April 1, 2018, when determining the
applicant’s status of the “beneficial owner” regarding tax treatments in connection with dividends, interest or royalties in the tax treaties,
several factors, including without limitation, whether the applicant is obligated to pay more than 50% of its income in twelve months to
residents in a third country or region, whether the business operated by the applicant constitutes the actual business activities, and
whether the counterparty country or region to the tax treaties does not levy any tax or grants tax exemption on relevant income or levies
tax at an extremely low rate, will be taken into account, and they will be analyzed according to the actual circumstances of the specific
cases. This circular further provides that applicants who intend to prove his or her status of the “beneficial owner” shall submit the
relevant documents to the relevant tax bureau according to the Administrative Measures for Nonresident Enterprises to Enjoy Treatments
under Tax Treaties. Accordingly, GreenTree Hotel (Hong Kong), Limited may be able to enjoy the 5% withholding tax rate for the
dividends they receive from our PRC subsidiaries, respectively, if they satisfy the conditions prescribed under Circular 81 and other
relevant tax rules and regulations, and obtain the approvals as required. However, if the relevant tax authorities consider the transactions
or arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the
favorable withholding tax in the future.
PRC Value-Added Tax
On March 23, 2016, the Ministry of Finance of China and the State Administration of Taxation of China jointly issued the Circular
on the Nationwide Implementation of Pilot Program for the Collection of Value Added-Tax Instead of Business Tax, or Circular 36, which
became effective on May 1, 2016. Subsequent to the effectiveness of Circular 36, most of our PRC subsidiaries’ business will be subject
to value-added tax, or VAT, at a rate of 6% and they would be permitted to offset input VAT by providing valid VAT invoices received
from vendors against their VAT liability.
According to Circular 36, the entities and individuals providing the services within the PRC shall be subject to VAT. The services are
treated as being provided within the PRC where either the service provider or the service recipient is located in the PRC. The services
subject to VAT include the provision of financial services such as transferring financial instruments. Based on the definition of “transfer
of financial instruments” under Circular 36, the ADSs and shares are likely to be treated as financial instruments. As such, where a
holder of the ADSs and shares who is an entity or individual located outside of the PRC re-sells the ADSs and shares to an entity or
individual located outside of the PRC and derives any gain, since neither the service provider nor the service recipient is located in the
PRC, theoretically Circular 36 does not apply and the buyer does not have the obligation to withhold the VAT or the local levies.
However, there is uncertainty as to the applicability of VAT if either the seller or buyer of ADSs and shares is located within the PRC.

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On April 4, 2018, the MOF and STA jointly promulgated the Circular of the Ministry of Finance and the STA on Adjustment of
Value-Added Tax Rates, or Circular 32. Circular 32 became effective on May 1, 2018 and shall supersede any previously existing
provisions in the case of any inconsistency. Further, On March 20, 2019, the MOF, the STA and the General Administration of Customs
jointly issued the Announcement on Policies for Deepening the VAT Reform, or Announcement 39, to further slash value-added tax
rates. According to Announcement 39, (i) for general VAT payers’ sales activities or imports that are subject to VAT at an existing
applicable rate of 16% or 10%, the applicable VAT rate is adjusted to 13% or 9% respectively; (ii) for the agricultural products purchased
by taxpayers to which an existing 10% deduction rate is applicable, the deduction rate is adjusted to 9%; (iii) for the agricultural products
purchased by taxpayers for production or commissioned processing, which are subject to VAT at 13%, the input VAT will be calculated at
a 10% deduction rate; (iv) for the exportation of goods or labor services that are subject to VAT at 16%, with the applicable export refund
at the same rate, the export refund rate is adjusted to 13%; and (v) for the exportation of goods or cross-border taxable activities that are
subject to VAT at 10%, with the export refund at the same rate, the export refund rate is adjusted to 9%. Announcement 39 came into
effect on April 1, 2019 and shall prevail in case of any conflict with existing provisions.
Regulations Relating to Lending
According to the General Lending Provisions promulgated by the PBOC in 1996, only financial institutions may legally engage in
the business of extending loans, and loans between companies that are not financial institutions are prohibited. According to the General
Lending Provisions, a company which is not a financial institution and offers loans may be imposed penalties in the amount equivalent to
one to five times of the income generated (being interests charged) from the loan advancing activities. However, according to the
Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases (the
“Private Lending Provisions”), which became effective on 1 September 2015 and was latest revised on 29 December 2020, borrowing
agreements between companies which are not financial institutions shall be classified as private lending and should be valid if such
lending is for business operation purposes and do not fall into certain situations stipulated in the abolished Contract Law or the newly
promulgated Civil Code (as applicable) of the PRC and Private Lending Provisions. PRC courts will support a company’s claim for
interest in respect of such lending as long as the annual interest rate does not exceed four times of the applicable one-year loan prime rate
(“LPR”).

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C.
Organizational Structure
Corporate Structures
The following diagram illustrates our corporate structure and the place of organization and ownership interest of each of our
subsidiaries as of the date of this annual report. It omits certain entities that are immaterial to our results of operations, business and
financial condition. Unless otherwise indicated, equity interests depicted in this diagram are held as to 100%.
Subsidiaries of GreenTree Hospitality Group Ltd.
An exhibit containing a list of our significant subsidiaries has been filed with this annual report.
D.
Property, Plants and Equipment
Please refer to “B. Business Overview—Facilities” for a discussion of our property, plants and equipment.
ITEM 4A.
UNRESOLVED STAFF COMMENTS
None.

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ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Unless otherwise stated, the discussion and analysis of our financial condition and results of operation in this section apply to our
financial information as prepared according to U.S. GAAP. You should read the following discussion and analysis of our financial
condition and operating results in conjunction with our consolidated financial statements and the related notes included elsewhere in this
annual report. The following discussion contains forward-looking statements based upon current expectations that involve risks and
uncertainties. Our actual results and the timing of selected events may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under “Item 3. Key Information—D. Risk Factors.”
Overview
We are the leading pure play franchised hotel operator in China. We achieved more than 95.0% of franchised-and-managed hotels in
our hotel network as early as 2013, and currently operated 98.6% of franchised-and-managed hotels in our network. Our pure play
franchised model allows us to expand rapidly in an asset-light manner and have brought us substantial financial performance in terms of
profitability, return on investments and success to its franchisees.
As of December 31, 2022, our nationwide hotel network consisted of 4,059 hotels with 302,497 rooms in China, covering all four
centrally-administrated municipalities and 355 cities throughout all 31 provinces and autonomous regions in China, as well as an
additional 916 hotels that were contracted for or under development. We were the fourth largest hotel group in China in terms of number
of hotels and rooms, according to China Hotel Association. We operate a rapidly-growing hotel networks in China – from 2012 to 2022,
we grew from 792 to 4,059 hotels at a CAGR of 17.8% and from 70,934 to 302,497 rooms at a CAGR of 15.6%.
We have built a strong suite of well-recognized and diversified brands, each with unique attributes and strengths to appeal to
different consumer segments and franchisee needs, covering economy hotels, mid-scale hotels, as well as business and mid-to-up-scale
hotels. Over the years, we have successfully forged an all-win ecosystem for our franchisees, guests and employees through a highly
effective and scalable franchise management system, a set of strong direct sales channels coupled with an established membership
program and a suite of state-of-the-art technologies and tools optimizing hotel operations and enhancing guest experiences.
Factors Affecting Our Results of Operations
While our business is affected by factors relating to general economic conditions and the hospitality industry in China, we believe
that our results of operations are also affected by company specific factors, including, among others:
●
The total number of hotels and hotel rooms in our hotel network. Our revenues are affected to a significant extent by the
number of hotels and hotel rooms we have in operation. We generate substantially all of our revenues from room nights sold at
our leased-and-operated hotels and the franchise management fees we charge to each of our franchised-and-managed hotels.
Furthermore, we believe expanding geographic coverage of our hotel network through increasing the number of hotels will
enhance our brand recognition. Our ability to expand our hotel network depends on whether we can provide consistent quality
services to our guests and franchisees and whether we can enhance our brand recognition in the market and win the competition
for suitable property sites and quality franchisee candidates.
●
The proportion of mature hotels in our hotel portfolio. We define mature hotels as those that have been in operation for more
than six months. It typically takes six months for our newly opened franchised-and-managed hotels to ramp up before such
hotels can generate normal and stable franchise management fees and for our new leased-and-operated hotels’ income to exceed
the hotel operating costs which are generally fixed in nature.
The operation of each leased-and-operated hotel goes through three stages: development, ramp up and mature operations. During the
ramp up stage, when the occupancy rate is relatively low, revenues generated by these new leased-and-operated hotels may be
insufficient to cover their operating costs. The lower franchise management fees generated by our franchised-and-operated hotels during
the ramp up stage and the pre-opening expenses incurred during the development stage and the lower profitability during the ramp-up
stage for our leased-and-operated hotels may have a significant negative impact on our financial performance.

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The table below illustrates the net increases of our hotels during 2020, 2021 and 2022.
    
Year Ended December 31,
    
2020
    
2021
2022
Hotels opened
 538
 722
 295
Hotels closed
 155
 403
 95
Net increase in total hotels
 383
 319
 200
We track the performance of our hotels by comparing hotel revenue of our hotels during ramp up stage and mature hotels, calculated
on a monthly rolling basis, taking into account the total number of hotels during ramp up stage and mature hotels in any particular period
of time.
The table below illustrates the comparison of performance between mature hotels and hotels during ramp up stage.
    
Year Ended December 31,
    
2020
    
2021
    
2022
Mature franchised-and-managed hotels(1)
 3,895
 4,222
 3,865
RevPAR (in RMB)
 105
 116
 100
Franchised-and-managed hotels during ramp up stage
 405
 371
 133
RevPAR (in RMB)
 101
 84
 69
(1)
As of end of the year.
    
Year Ended December 31,
    
2020
    
2021
    
2022
Mature leased-and-operated hotels(1)
 32
 58
 58
RevPAR (in RMB)
 102
 136
 128
Revenue (in RMB thousands)
 227,074
 391,960
 338,506
(1)
As of end of the year.
●
The fixed nature of our hotel operating costs. For our leased-and-operated hotels, a significant portion of our operating costs
and expenses, including rental and base salary, is generally fixed. As a result, an increase in our revenues achieved through
higher RevPAR will generally result in higher profitability, whereas a decrease in our revenues could result in a
disproportionately large decrease in our earnings. For franchised-and-managed hotels, the fixed cost components are relatively
limited, and the incremental costs associated with each additional franchisee are minimal, which helps us achieve economies of
scale as we attract more franchisees over time.
●
Seasonality and special events. The hospitality industry is subject to fluctuations in revenues due to seasonality. Generally, the
first quarter, in which both the New Year and Spring Festival holidays fall, accounts for a lower percentage of our annual
revenues than the other quarters of the year. In addition, certain special events, such as large-scale exhibitions, concerts or
sports events, may increase the demand for our hotels significantly as such special events may attract travelers into and within
the regions in China where we operate hotels.
Key Performance Indicators
We utilize a set of non-financial and financial key performance indicators which our senior management reviews frequently. The
review of these indicators facilitates timely evaluation of the performance of our business and effective communication of results and key
decisions, allowing our business to react promptly to changing customer demands and market conditions.

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88
Our non-financial key performance indicators consist of increase in the total number of hotels and hotel rooms in our hotel network,
as well as RevPAR achieved by our leased-and-operated hotels and franchised-and-managed hotels. RevPAR is a commonly used
operating measure in the hospitality industry and is defined as the product of average occupancy rates and average daily rates achieved.
Occupancy rates of our hotels mainly depend on the locations of our hotels, product and service offering, the effectiveness of our sales
and brand promotion efforts, our ability to effectively manage hotel reservations, the performance of managerial and other employees of
our hotels, as well as our ability to respond to competitive pressure. We set the room rates of our hotels primarily based on the location of
hotels, room rates charged by our competitors within the same locality, and our relative brand and product strength in the city or city
cluster.
Our financial key performance indicators consist of revenues, operating costs and expenses, which are discussed in greater detail in
the following paragraphs.
Revenues
We primarily derive our revenues from operation of our leased-and-operated hotels and various types of fees we charge our
franchisees in relation to our franchised-and-managed hotels. We also generate revenue from the one-time membership fees charged to
our hotel guests. Our revenues are net of a value-added tax of 6% and other related taxes. The following table sets forth our revenues
generated by our franchised-and-managed hotels and leased-and-operated hotels, both in absolute amount and as a percentage of total
revenues for the year indicated.
    
2020
    
2021
    
2022
    
RMB
    
%  
    
RMB
    
%  
    
RMB
    
US$
    
%  
Revenues:
  
   
  
   
  
   
  
Leased-and-operated hotels(1)
 227,074
 24.4  
 391,960
 32.5  
 338,506
 49,079  
 36.1
Franchised-and-managed hotels
 677,481
 72.9  
 774,359
 64.2  
 582,441
 84,446  
 62.2
Others
 25,455
 2.7  
 39,827
 3.3  
 15,854
 2,298  
 1.7
Total revenues
 930,010
 100.0  
 1,206,146
 100.0  
 936,801
 135,823    100.0
●
Franchised-and-managed Hotels. In 2020, 2021 and 2022, we generated revenues of RMB677.5 million, RMB774.4 million and
RMB582.4 million (US$84.4 million) from our franchised-and-managed hotels, which accounted for 72.9%, 64.2% and 62.2% of
our revenues for the respective years, which include revenues from membership fees of franchised-and-managed hotels.
We select franchisees who are property owners, existing hotel operators or hotel investors. We train and manage general managers
for our franchised-and-managed hotels and impose the same standards on all franchised-and-managed hotels to ensure product quality
and consistency across our hotel network. Pursuant to the franchise-and-management agreements, we charge the franchisees fixed hotel
manager fees to compensate us for the franchised-and-managed hotel managers’ salaries, social welfare benefits and certain other out-of-
pocket expenses as incurred. The hotel manager fee is recognized as revenue on a monthly basis. Management services we provide to our
franchisees generally include appointing and training hotel managers, obtaining access to and integrating into our central reservation
system and our proprietary IT system, providing sales and marketing support, conducting quality assurance inspections, and providing
other operational support and information. Our franchisees are responsible for operating expenses and the costs of developing and
operating the hotels, including renovating the hotels according to our standards. We believe that our franchised-and-managed model has
enabled us to quickly and effectively expand our geographical coverage and increase our market share in an asset-light manner by
utilizing the local knowledge and relationships of our franchisees and the properties that they may own or have access to which are
suitable for future hotel business cooperation with us.

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89
Our revenues from franchised-and-managed hotels are primarily affected by the number of hotels and the revenues generated by the
franchised-and-managed hotels. Our franchise agreements typically run for an initial term of 10 to 20 years. We collect franchise
management fees from our franchisees and do not bear loss, if any, incurred by our franchisees. Our franchisees are generally required to
pay us an initial franchise fee ranging between RMB150,000 and RMB250,000, depending on the number of rooms in the hotel. They are
also responsible for all costs and expenses related to hotel construction and renovation. In addition, our franchise agreements typically
provide for a monthly franchise management fee of 3% to 5% of the total revenues generated by each franchised-and-managed hotel. In
general, we charge franchisees who open multiple hotels under our franchised-and-managed model a lower fee to reward their loyalty.
On average, we charged our franchisees a monthly franchise management fee of 4.5%, 4.4% and 4.7% of the total revenues generated by
each franchised-and-managed hotel in 2020, 2021 and 2022. We also collect from franchisees a reservation fee on a per room night basis
for using our central reservation system, an annual IT system maintenance fee and a part of the membership registration fee to service
customers who join our membership program at franchised-and-managed hotels. A number of these hotel general managers are our direct
employees and the franchisees will reimburse us the general managers’ salary which is recognized as part of our revenues.
The table below sets forth the revenues from initial franchise fee and recurring franchise management fee and others, both in
absolute amount and as a percentage of our revenues generated from franchised-and-managed hotels for the years indicated:
    
2020
    
2021
    
2022
    
RMB
    
%  
    
RMB
    
%  
    
RMB
    
US$
    
%  
Initial franchise fee
 61,051  
 9.0
 76,263  
 9.8
 42,424  
 6,151  
 7.3
Recurring franchise management fee
 616,430  
 91.0
 698,096  
 90.2
 540,017  
 78,295  
 92.7
Revenues from franchised-and- managed hotels
 677,481    100.0
 774,359    100.0
 582,441  
 84,446  
 100.0
Revenues from recurring franchise management fee and others as a percentage of our revenues from franchised-and-managed hotels
were 91.0% in 2020, 90.2% in 2021 and 92.7% in 2022.
·
Leased-and-operated Hotels. In 2020, 2021 and 2022, we generated revenues of RMB227.1 million, RMB392.0 million and
RMB338.5 million (US$49.1 million) (including RMB77.7 million, RMB74.7 million and RMB61.6 million (US$8.9 million)
sublease rental revenue for 2020, 2021 and 2022, respectively) from our leased-and-operated hotels, which accounted for
24.4%, 32.5% and 36.1% of our revenues for the respective years.
For our leased-and-operated hotels, we own or lease properties from property owners or lessors and we are responsible for hotel
conversion and customization to conform to our standards, as well as for repairs and maintenance and operating costs and expenses of
properties over the term of the lease. We are also responsible for hotel operations and management, including hiring, training and
supervising the hotel managers and employees required to operate our hotels and purchasing supplies. Our typical lease term ranges from
10 to 20 years with an initial three to six-month rent-free period. We generally pay rent on a quarterly or semi-annual basis.
Our revenues generated from leased-and-operated hotels are significantly affected by the following:
●
the total number of leased-and-operated hotels in our hotel network;
●
the total number of leased-and-operated hotel rooms in our hotel network; and
●
RevPAR achieved by our leased-and-operated hotels, which represents the product of average daily rates and occupancy rates.
The growth of revenues generated from our leased-and-operated hotels depends significantly upon our ability to expand our hotel
network into new locations in China and maintain competitive rates.
Operating Costs and Expenses. Our operating costs and expenses consist of hotel operating costs, selling and marketing expenses,
general and administrative expenses other operating expenses, impairment loss of goodwill and other general expenses.

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90
The following table sets forth the components of our operating costs and expenses, both in absolute amount and as a percentage of
total revenues for the year indicated.
    
Year Ended December 31, 
 
    
2020
2021
2022
    
RMB
    
%  
    
RMB
    
%  
    
RMB
    
US$
    
%  
    
(in thousands, except for percentages)
Operating costs and expenses:
      
 
      
 
   
      
Hotel operating costs:
      
 
      
 
   
      
Rental
 118,295    12.7  
 235,568    19.5  
 224,536  
 32,555  
 24.0
Utilities
 15,372  
 1.7  
 25,783  
 2.1  
 27,877  
 4,042  
 3.0
Personnel costs
 46,942  
 5.0  
 82,114  
 6.8  
 74,281  
 10,770  
 7.9
Depreciation and amortization
 53,850  
 5.8  
 80,576  
 6.7  
 92,798  
 13,454  
 9.9
Consumables, food and beverage
 43,258  
 4.7  
 69,496  
 5.8  
 41,282  
 5,985  
 4.4
Costs of hotel managers of franchised-and-managed hotels
 91,665  
 9.9  
 114,779  
 9.5  
 107,852  
 15,637  
 11.5
Other costs of franchised-and-managed hotels
 22,986  
 2.5  
 26,124  
 2.2  
 14,340  
 2,079  
 1.5
Others
 9,291  
 1.0  
 16,937  
 1.4  
 11,053  
 1,603  
 1.2
Total hotel operating costs
 401,659    43.2  
 651,377    54.0  
 594,019  
 86,125  
 63.4
Selling and marketing expenses
 75,347  
 8.1  
 66,922  
 5.5  
 38,534  
 5,587  
 4.1
General and administrative expenses
 160,421    17.2  
 256,160    21.3  
 210,760  
 30,557  
 22.5
Other operating expenses
 1,731  
 0.2  
 4,938  
 0.4  
 3,245  
 471  
 0.4
Impairment loss of goodwill
 91,236
 13,228
 9.7
Other general expenses
 3,000  
 0.4  
 99,886  
 8.3  
 461,598  
 66,925  
 49.3
Total operating costs and expenses
 642,158    69.0  
 1,079,283    89.5  
 1,399,392  
 202,893    149.4
●
Hotel operating costs. Our hotel operating costs consist of costs and expenses directly attributable to the operations of our
franchised-and-managed and leased-and-operated hotels. Operating costs primarily include costs related to our leased and operated
hotels, including rental payments and utility costs, compensation and benefits for our hotel based employees, costs of hotel room
consumable products, such as bedding accessories, towel and sanitary amenities, depreciation and amortization of leasehold
improvements and others including maintenance expenses, telecommunication expenses and public service charges, as well as costs
related to our franchised-and-managed hotels, including (i) compensation and benefits for franchised-and-managed hotel general
managers appointed and trained by us, the regional managers of the operating department and other headquarter personnel that serve
the franchise and managed hotels, and (ii) related travel and telecommunication expenses.
●
Selling and marketing expenses. Our selling and marketing expenses consist primarily of commissions to travel intermediaries,
expenses for marketing programs and materials, expenses in relation to our membership program, compensation and benefits for our
sales and marketing personnel, and others including meals and travel expenses for our sales and marketing personnel.
●
General and administrative expenses. Our general and administrative expenses consist primarily of compensation and benefits,
including share-based compensation, for our corporate and regional office employees and other employees who are not sales and
marketing or hotel-based employees, costs of third-party professional services, travel and accommodation expenses, bad debt
provision and other expenses which include bank charges and stamp duty.
●
Impairment loss of goodwill. Our impairment loss of goodwill included Argyle and Urban.
●
Other general expenses. Our other general expenses included one-time impairment charges except impairment loss of goodwill for
Argyle and Urban as mentioned earlier, a provision for other assets related to two properties we planned to purchase or lease to
develop flagship L&O hotels and the company’s new headquarters, as well as provisions for loan receivables related to franchisee
loans.

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91
A.
Results of Operations
The following table sets forth a summary of our consolidated results of operations, both in absolute amount and as a percentage of
total revenues for the year indicated. This information should be read together with our consolidated financial statements and related
notes included elsewhere in this annual report. We believe that the year-to-year comparison of operating results should not be relied upon
as being indicative of future performance.
    
Year Ended December 31, 
 
    
2020
2021
2022
 
    
RMB
    
%  
    
RMB
    
%  
    
RMB
    
US$
    
%  
    
(in thousands, except for percentage)
Consolidated Statement of Comprehensive
Income Data:
      
 
      
 
   
      
Revenues:
      
 
      
 
   
      
Leased-and-operated hotels
 227,074  
 24.4  
 391,960  
 32.5  
 338,506  
 49,079  
 36.1
Franchised-and-managed hotels
 677,481  
 72.9  
 774,359  
 64.2  
 582,441  
 84,446  
 62.2
Others
 25,455  
 2.7  
 39,827  
 3.3  
 15,854  
 2,298  
 1.7
Total revenues
 930,010    100.0  
 1,206,146    100.0  
 936,801  
 135,823  
 100.0
Operating costs and expenses:
   
  
 
  
Hotel operating costs
 (401,659) 
 (43.2) 
 (651,377) 
 (54.0) 
 (594,019) 
 (86,125) 
 (63.4)
Selling and marketing expenses
 (75,347) 
 (8.1) 
 (66,922) 
 (5.5) 
 (38,534) 
 (5,587) 
 (4.1)
General and administrative expenses
 (160,421) 
 (17.2) 
 (256,160) 
 (21.3) 
 (210,760) 
 (30,557) 
 (22.5)
Other operating expense
 (1,731) 
 (0.2) 
 (4,938) 
 (0.4) 
 (3,245) 
 (471) 
 (0.4)
Impairment loss of goodwill
 (91,236)
 (13,228)
 (9.7)
Other general expenses
 (3,000) 
 (0.4) 
 (99,886) 
 (8.3) 
 (461,598) 
 (66,925) 
 (49.3)
Total operating costs and expenses
 (642,158) 
 (69.1) 
 (1,079,283) 
 (89.5) 
 (1,399,392) 
 (202,893)   (149.4)
Other operating income
 31,399  
 3.4  
 27,060  
 2.2  
 19,449  
 2,820  
 2.1
Income from operations
 319,251  
 34.3  
 153,923  
 12.8  
 (443,142) 
 (64,250) 
 (47.3)
Interest income and other, net
 72,934  
 7.8  
 59,974  
 5.0  
 47,384  
 6,870  
 5.1
Interest expenses
 (3,456) 
 (0.4) 
 (12,671) 
 (1.1) 
 (25,376) 
 (3,679) 
 (2.7)
Gains (losses) from investments in equity
securities
 (36,774) 
 (4.0) 
 9,138  
 0.8  
 (62,156) 
 (9,012) 
 (6.7)
Other income/expense, net
 2,297  
 0.2  
 11,819  
 1.0  
 24,230  
 3,513  
 2.6
Income before income taxes
 354,252  
 38.1  
 222,183  
 18.4  
 (459,061) 
 (66,558) 
 (49.0)
Income tax expense
 (110,459) 
 (11.9) 
 (108,889) 
 (9.0) 
 45,592  
 6,610  
 4.9
Income before share of losses in equity investees
 243,793  
 26.2  
 113,294  
 9.4  
 (413,468) 
 (59,947) 
 (44.1)
Share of losses (gains) in equity investees, net of
tax
 910  
 0.1  
 383  
 0.0  
 (1,598) 
 (232) 
 (0.2)
Net income
 244,703  
 26.3  
 113,677  
 9.4  
 (415,067) 
 (60,179) 
 (44.3)
Net loss attributable to noncontrolling interests
 16,641  
 1.8  
 3,761  
 0.3  
 32,850  
 4,763  
 3.5
Net income attributable to ordinary
shareholders
 261,344  
 28.1  
 117,438  
 9.7  
 (382,217) 
 (55,416) 
 (40.8)

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92
The following tables present certain unaudited financial data and selected operating data as of and for the years ended December 31,
2020, 2021 and 2022:
    
As of December 31, 
    
2020
    
2021
    
2022
Selected Operating Data:
   
   
  
Total hotels in operation
 4,340  
 4,659  
 4,059
Franchised-and-managed hotels
 4,300  
 4,593  
 3,998
Leased-and-operated hotels
 40  
 66  
 61
Total hotel rooms in operation
 315,335  
 337,153  
 302,497
Franchised-and-managed hotels
 310,447  
 330,089  
 295,932
Leased-and-operated hotels
 4,888  
 7,064  
 6,565
Number of cities
 345  
 367  
 355
    
Year Ended December 31, 
 
    
2020
    
2021
    
2022
 
Occupancy rate (as a percentage)
   
   
  
Total hotels in operation
 68.7 %  
 71.1 %  
 63.7 %
Franchised-and-managed hotels
 68.9 %  
 71.3 %  
 63.8 %
Leased-and-operated hotels
 57.8 %  
 63.4 %  
 58.4 %
Average daily rate (in RMB)
   
   
  
Total hotels in operation
 152  
 164  
 159
Franchised-and-managed hotels
 152  
 163  
 157
Leased-and-operated hotels
 179  
 213  
 219
RevPAR (in RMB)
   
   
  
Total hotels in operation
 105  
 116  
 101
Franchised-and-managed hotels
 105  
 116  
 100
Leased-and-operated hotels
 104  
 135  
 128
(1) Based on the number of available rooms.
(2) Our Occupancy rate, Average daily rate and RevPAR data for the year ended December 31, 2019 presented above reflect the impact
of Argyle Hotel Management Group (Australia) Pty Ltd, or Argyle, and Urban Hotel Group, or Urban, after we consolidated them in
our financial statements starting from April 2019 and December 2019, respectively. If such Occupancy rate, Average daily rate and
RevPAR data were also to reflect the full year impact of Argyle and Urban prior to the respective acquisitions, and for the full year
ended December 31, 2019: our Occupancy rate would have been 77.8% for Total hotels in operation, with 78.0% for Franchised-
and-managed hotels and 67.5% for Leased-and-operated hotels; our Average daily rate would have been 168 for Total hotels in
operation, with 168 for Franchised-and-managed hotels and 205 for Leased-and-operated hotels; and our RevPAR would have been
131 for Total hotels in operation, with 131 for Franchised-and-managed hotels and 138 for Leased-and-operated hotels. We
subsequently have deconsolidated Argyle from our financial statements starting from June 2022. We subsequently have
deconsolidated Urban from our financial statements starting from December 2022. The number of hotels as of the end of 2022 didn’t
include the number of Argyle’s hotels and Urban’s hotels. The Revpar for 2022 considered operation performance of Urban before
the disposal of our interest in Urban.

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93
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
Revenues. Our total revenues decreased by 22.3% from RMB1,206.1 million in 2021 to RMB936.8 million (US$135.8 million) in
2022. The decrease was primarily due to the deconsolidation of Argyle and the disposal of our interest in Urban, and the impact of
COVID-19, which resulted in lower RevPAR at L&O hotels and F&M hotels. For the full year 2022, we opened 295 hotels and closed 95
hotels. The revenue per available room, or RevPAR, was RMB101 in the full year 2022, representing a 13.2% year-over-year decrease.
Excluding the impact of Argyle and Urban, compared with the full year of 2021, total revenues for the full year of 2022 decreased by
18.8%.
Franchised-and-managed hotels. Revenues from our franchised-and-managed hotels decreased by 24.8% from RMB774.4 million
in 2021 to RMB582.4 million (US$84.4 million) in 2022. The initial franchise fees decreased by 44.4% year-over-year, mainly
attributable to the decrease in the gross opening number and closing number of F&M hotels. The recurring franchise management fees
decreased from RMB698.1 million in 2021 to RMB540.0 million in 2022, primarily due to three reasons: first, a 13.6% year-over-year
decrease in F&M hotels’ RevPAR; second, the fee waivers to franchisees of quarantined hotels; and third, the deconsolidation of Argyle
and the disposal of our interest in Urban. Excluding the impact of Argyle and Urban, total revenues from F&M hotels for the full year of
2022 decreased by 24.2% year over year.
Leased-and-operated hotels. Revenues from our leased-and-operated hotels decreased by 13.6% from RMB392.0 million in 2021 to
RMB338.5 million (US$49.1 million) in 2022. The decrease was primarily due to three reasons: first, the deconsolidation of Argyle and
the disposal of our interest in Urban; second, the disposal of 2 hotels in operation since the beginning of 2022 and was partially offset by
an increase of 8 newly opened L&O hotels over the same period; and third, a 5.4% year-over-year decrease in L&O hotels’ RevPAR.
Excluding the impact of Argyle and Urban, total revenues from L&O hotels for the full year of 2022 decreased by 6.8% year over year.
Hotel operating costs. Our hotel operating costs decreased by 8.8% from RMB651.4 million in 2021 to RMB594.0 million
(US$86.1 million) in 2022. The decrease was mainly attributable to the deconsolidation of Argyle and the disposal of our interest in
Urban, and disposal of L&O hotels.
Selling and marketing expenses. Our selling and marketing expenses decreased by 42.4% from RMB66.9 million in 2021 to
RMB38.5 million (US$5.6 million) in 2022. The decrease was mainly attributable to lower advertising expenses and staff related
expenses. Our selling and marketing expenses decreased as a percentage of our revenues from 5.5% in 2021 to 4.1% in 2022.
General and administrative expenses. Our general and administrative expenses decreased by 17.7% from RMB256.2 million in
2021 to RMB210.8 million (US$30.6 million) in 2022. The decrease was primarily attributable to the reduction in consulting fees, staff
related cost and office expense.
Other operating expenses. Our other operating expenses decreased by 34.3% from RMB4.9 million in 2021 to RMB3.2 million
(US$0.5 million) in 2022, primarily due to the decrease in one-off loss from the disposal of property and equipment.
Impairment loss of goodwill. The loss in 2022 mainly consisted of RMB91.2 million(US$13.2 million) attributable to Argyle and
Urban.
Other general expenses. Our other general expenses significantly increased by 362.1% from RMB99.9 million in 2021 to
RMB461.6million (US$66.9 million) in 2022, primarily due to the impairments charges except impairment loss of goodwill for Argyle
and Urban, provision for other assets related to two properties of Shanghai HongYuan Shengshi, and provision for loan receivables
related to franchisee loans.
Other operating income. Our other operating income decreased by 28.1% from RMB27.1 million in 2021 to RMB19.4 million
(US$2.8 million) in 2022, primarily due to the decrease of financial subsidies from RMB17.0 million in 2021 to RMB11.5 million in
2022.

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94
Income from operations. As a result of the foregoing, our income from operations significantly decreased by 387.9% from
RMB153.9 million in 2021 to RMB-443.1 million (US$-64.2 million) in 2022. As a percentage of our revenues, our income from
operations decreased from 12.8% in 2021 to -47.3% in 2022. Excluding impairment loss of goodwill and other general expenses, income
from operation from purely operating activities was RMB 109.7million, with a margin of 11.7%.
Interest income and other, net. Our net interest income decreased by 21.0% from RMB60.0 million in 2021 to RMB47.4 million
(US$6.9 million) in 2022, primarily due to a decrease in interest income from average aggregate balances of short-term investment, long-
term investment and time deposits in 2022.
Gains (losses) from investments in equity securities. Our gains from investments in equity securities significantly decreased by
780.2% from RMB9.1 million in 2021 to RMB-62.2 million (US$-9.0 million) in 2022. The balance of our investments in equity
securities decreased from RMB158.0 million as of December 31, 2021 to RMB41.4 million (US$6.0 million) as of December 31, 2022.
Aside from these A-share securities, we also hold 33,652,000 shares of Sunkwan Properties, in which we invested as a cornerstone
investor in its initial public offering on the Hong Kong Stock Exchange in 2020. Any realized or unrealized gains or losses resulting from
the fluctuations of the market value of these securities will be recognized in earnings in the period which they occur.
Income tax expense. Our income tax expense decreased by 141.9% from RMB108.9 million in 2021 to RMB-45.6 million (US$-6.6
million) in 2022, primarily due to the decrease of income from operations. The effective tax rate decreased from 49.0% in 2021 to 9.9%
in 2022 due to the reversal of the income tax expense from the projected dividends of previous years.
Share of (losses) gains in equity investees, net of tax. We recognized gains of RMB0.4 million in 2021, mainly attributable to the
gains from Zhilong and losses from Yueyuanbaili. We recognized losses of RMB1.6 million (US$0.2 million) in 2022, mainly
attributable to gains from Yueyuanbaili and losses from Zhilong.
Net loss attributable to non-controlling interests. The loss in 2022 mainly consisted of RMB32.8 million(US$4.8 million)
attributable to GHG’s minority shareholders.
Net income attributable to our ordinary shareholders. As a result of the foregoing, our net income attributable to our ordinary
shareholders significantly decreased by 425.5% from RMB117.4 million in 2021 to RMB-382.2 million (US$-55.4 million) in 2022. Our
net margin, defined as our net income attributable to our ordinary shareholders as a percentage of our revenues, decreased from 9.7% in
2021 to -40.8% in 2022.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
Revenues. Our total revenues increased by 29.7 % from RMB930.0 million in 2020 to RMB1,206.1 million in 2021. The increase
was primarily due to newly opened L&O and F&M hotels. For the full year 2021, we have opened 722 new hotels and closed 403 hotels
at the same time. The revenue per available room, or RevPAR, was RMB116 in the full year 2021, representing a 11.3% year-over-year
increase.
Franchised-and-managed hotels. Revenues from our franchised-and-managed hotels increased by 14.3% from RMB677.5 million
in 2020 to RMB774.4 million in 2021. The initial franchise fees increased by 24.9% year-over-year, mainly attributable to the gross
opening of 693 F&M hotels and the closure of 400 F&M hotels. The recurring franchise management fees increased from RMB616.4
million in 2020 to RMB698.1 million in 2021, primarily due to 10.7% increase in RevPAR and the 6.8% year-over-year increase in the
number of F&M hotels, and was offset by the fee waiver to franchisees related to newly acquired hotels.
Leased-and-operated hotels. Revenues from our leased-and-operated hotels, including sublease rental revenues of RMB77.7 million
and RMB74.7 million for 2020 and 2021, respectively, increased by 72.6% from RMB227.1 million in 2020 to RMB392.0 million in
2021. The increase was primarily due to 30.4% year-over-year increase in L&O hotels’ RevPAR and revenues from the 29 L&O hotels
opened since the beginning of 2021, and partially offset by the closure of 3 L&O hotels over the same period.
Hotel operating costs.Our hotel operating costs increased by 62.2% from RMB401.7 million in 2020 to RMB651.4 million in 2021,
The increase was mainly attributable to higher rents, higher utilities and consumables, higher staff headcount and compensation
expenses, higher depreciation and amortization, and higher ramp up costs. In 2021, there were 29 L&O hotels opened since the

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beginning of 2021, and three L&O hotels closed over the same period, which accounted for the main increase in hotel operating costs.
Excluding L&O hotel operating costs, costs related to F&M hotels and others increased 22.9%.
Selling and marketing expenses. Our selling and marketing expenses decreased by 11.2% from RMB 75.3 million in 2020 to RMB
66.9 million in 2021, The decrease was mainly attributable to lower advertising expenses. Our selling and marketing expenses decreased
as a percentage of our revenues from 8.1% in 2020 to 5.5% in 2021.
General and administrative expenses.Our general and administrative expenses increased by 59.7% from RMB160.4 million in 2020
to RMB 256.2 million in 2021, the increase was primarily attributable to the opening of 29 L&O hotels since the beginning of 2021, the
impact of provision for bad debts incurred during 2021, and the increased one-time consulting fees for capital market advice.
Other operating expense. Our other operating expense increased by 185.2% from RMB1.7 million in 2020 to RMB4.9 million in
2021, primarily due to one-off loss from the disposal of property and equipment and compensation to lessor due to early termination.
Other operating income. Our other operating income decreased by 13.8% from RMB31.4 million in 2020 to RMB27.1 million in
2021, primarily due to the decrease of financial subsidies from RMB20.1 million in 2020 to RMB17.0 million in 2021.
Income from operations. As a result of the foregoing, our income from operations decreased by 51.8% from RMB319.3 million in
2020 to RMB153.9 million in 2021. As a percentage of our revenues, our income from operations decreased from 34.3% in 2020 to
12.8% in 2021.
Interest income and other, net. Our net interest income decreased by 17.8% from RMB72.9 million in 2020 to RMB60.0 million in
2021, primarily due to primarily due to a decrease in interest income from average aggregate balances of cash and cash equivalents,
restricted cash, short-term investment and time deposits in 2021.
Gains (losses) from investments in equity securities. Our gains (losses) from investments in equity securities increased from
negative RMB36.8 million in 2020, including mark-to-market losses of RMB38.8 million, commission for stock purchase of RMB0.7
million, to profit RMB9.1 million in 2021, including mark-to-market profit of RMB 6.4 million, commission for stock purchase of RMB
0.3 million. The balance of our investments in equity securities decreased from RMB242.4 million as of December 31, 2020 to RMB158
million as of December 31, 2021. Aside from these A-share securities, we also hold 41,336,000 shares of Gingko, which we acquired
during its initial public offering on the Hong Kong Stock Exchange in 2019, and 33,652,000 shares of Sunkwan Properties, in which we
invested as a cornerstone investor in its initial public offering on the Hong Kong Stock Exchange in 2020. Any realized or unrealized
gains or losses resulting from the fluctuations of the market value of these securities will be recognized in earnings in the period which
they occur.
Income tax expense. Our income tax expenses decreased by 1.4% from RMB110.5 million in 2020 to RMB108.9 million in 2021,
primarily due to the decrease of income from operations. The effective tax rate increased from 31.2% in 2020 to 49.0% in 2021 due to
the tax on bad debts provisions and share repurchase plans.
Share of (losses) gains in equity investee, net of tax. The gains in 2020 mainly consist of RMB0.9 million from Zhilong. We
recognized gains of RMB0.4 million in 2021, mainly attribute to the gains from Zhilong and losses from Yueyuanbaili.
Net loss attributable to non-controlling interests. The loss in 2021 mainly consist of RMB3.76 million attributable to GHG’s
minority shareholders.
Net income attributable to our ordinary shareholders. As a result of the foregoing, our net income attributable to our ordinary
shareholders decreased by 55.1% from RMB261.3 million in 2020 to RMB117.4 million in 2021. Our net margin, defined as our net
income attributable to our ordinary shareholders as a percentage of our revenues, decreased from 28.1% in 2020 to 9.7% in 2021.
B.
Liquidity and Capital Resources
Our principal sources of liquidity have been cash generated from operating activities. Our cash and cash equivalents and restricted
cash balance as of December 31, 2022 was RMB670.4 million (US$97.2 million). Our cash and cash equivalents consist of cash on hand
and liquid investments which have maturities of three months or less when acquired.

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We have been able to meet our working capital and capital expenditure needs, and we believe that we will be able to meet our
working capital needs in at least the next twelve months with our operating cash flow and existing cash and cash equivalents. The
following table sets forth a summary of our cash flows for the years indicated:
    
Year Ended December 31, 
2020
    
2021
    
2022
 
RMB
RMB
RMB
    
US$
(in thousands)
Net cash provided by operating activities
 
 295,257  
 360,975  
 292,213  
 42,367
Net cash provided by investing activities
 
 (111,553) 
 (928,388) 
 398,459  
 57,771
Net cash (used in) provided by financing activities
 
 115,528  
 255,628  
 (341,896) 
 (49,570)
Effect of exchange rate changes on cash and cash equivalents and restricted cash
 
 (7,664) 
 (1,344) 
 1,073  
 156
Net increase (decrease) in cash and cash equivalents and restricted cash
 
 291,568  
 (313,129) 
 349,849  
 50,724
Cash and cash equivalents and restricted cash at the beginning of the year
 
 342,160  
 633,728  
 320,599  
 46,482
Cash and cash equivalents and restricted cash at the end of the year
 
 633,728  
 320,599  
 670,448  
 97,206
Operating Activities
Net cash provided by operating activities was RMB292.2 million (US$42.4 million) in 2022, compared to RMB361.0 million in
2021 and RMB295.3 million in 2020.
Net cash provided by operating activities in 2022 was RMB292.2 million (US$42.4 million), which was primarily attributable to our
net income of RMB-415.1 million, adjusted to deduct (i) foreign exchange gains of RMB 17.7 million, (ii) interest income of RMB 0.8
million, and to add back (i) bad debt expense of RMB428.3 million, (ii) lease expense to reduce operating lease right-of-use assets of
RMB176.4 million, (iii) non-cash depreciation and amortization of RMB109.9 million, (iv) impairment of goodwill of RMB91.2 million,
and (v) losses from investments in equity securites of RMB62.2million, (vi) impairment of long lived assets of RMB 60.3 million and
(vii) loss from disposal of a subsidiary of RMB 16.1million. The amount was further adjusted by changes in itemized balances of
operating assets and liabilities that have a negative effect on cashflow, including primarily (i) an increase in deferred taxes of RMB121.9
million, (ii) a decrease in operating lease liabilities of RMB107.0 million, (iii) a decrease in deferred revenue of RMB 75.9 million
mainly attributable to a decrease in our membership fees received and initial franchisee fees received, (iv) increase in our accounts
receivable of RMB 56.7million mainly attributable to an increase of receivables from franchisees and hotel guests, (v) a decrease in
advance from customers of RMB 16.3 million as well as certain changes in itemized balances of operating assets and liabilities that have
a positive effect on cashflow, including primarily (i) an increase in accrued expenses and other current liabilities of RMB88.8 million, (ii)
a decrease in Other current assets of RMB46.2 million, (iii) an increase in our recognized tax benefits of RMB20.7 million, (iv) an
increase in salary and welfare payable of RMB 10.1 million.
Net cash provided by operating activities in 2021 was RMB361 million, which was primarily attributable to our net income of
RMB113.7 million, adjusted to deduct interest income of RMB3.7 million , and to add back (i) non-cash depreciation and amortization of
RMB98.1 million, (ii) losses from investments in equity securities of RMB9.1 million, and (iii) bad debt expense of RMB132.6 million.
The amount was further adjusted by changes in itemized balances of operating assets and liabilities that have a negative effect on
cashflow, including primarily (i) a decrease in our deferred revenue of RMB53.6 million mainly attributable to a decrease in our
membership fees received and initial franchisee fees received, (ii) an increase in our accounts receivable of RMB22.3 million mainly
attributable to a decrease in bad debt provision due to the recovery from COVID 19 and improved operating performance, (iii) an
increase in other assets of RMB49.2 million, (iv) an increase in other current assets of RMB60.3 million,(v) an increase in income tax
payable of RMB16.6 million , as well as certain changes in itemized balances of operating assets and liabilities that have a positive effect
on cashflow, including primarily (i) an increase in our unrecognized tax benefits of RMB38.1 million, (ii) an increase in accrued
expenses and other current liabilities of RMB71.5 million, (iii) an increase in salary and welfare payable of RMB8.6 million.

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Net cash provided by operating activities in 2020 was RMB295.3 million, which was primarily attributable to our net income of
RMB244.7 million, adjusted to deduct interest income of RMB11.5 million, and to add back (i) non-cash depreciation and amortization
of RMB65.9 million, (ii) losses from investments in equity securities of RMB44.5 million, and (iii) bad debt expense of RMB30.0
million. The amount was further adjusted by changes in itemized balances of operating assets and liabilities that have a negative effect on
cashflow, including primarily (i) a decrease in our deferred revenue of RMB59.5 million mainly attributable to a decrease in our
membership fees received and initial franchisee fees received, (ii) an increase in our accounts receivable of RMB28.8 million mainly
attributable to a decrease in bad debt provision due to the recovery from COVID-19 and improved operating performance, (iii) an
increase in other assets of RMB19.7 million, (iv) an increase in other current assets of RMB18.8 million, (v) an increase in deferred taxes
of RMB12.6 million, as well as certain changes in itemized balances of operating assets and liabilities that have a positive effect on
cashflow, including primarily (i) an increase in our unrecognized tax benefits of RMB29.0 million, (ii) an increase in accrued expenses
and other current liabilities of RMB13.2 million, (iii) a decrease in amounts due from related parties of RMB10.3 million, and (iv) an
increase in salary and welfare payable of RMB8.9 million.
Investing Activities
Net cash provided by investing activities was RMB398.5 million (US$57.8 million) in 2022, compared to the net cash used in
investing activities of RMB928.4 million in 2021 and RMB111.6 million in 2020.
Net cash provided by investing activities in 2022 was RMB398.5 million (US$57.8 million), primarily attributable to (i) proceeds
from short-term investments of RMB517.5 million, (ii) proceeds from disposal of equity securities of RMB 116.6 million. (iii) Proceeds
from disposal of subsidiaries of RMB79.7 million. (iv) repayment of loan from franchisees net of RMB48.1 million, partially offset by (i)
purchase of short-term investments of RMB161.8 million, (ii) loan to related parties net of RMB125.1 million, (iii) purchases of property
and equipment of RMB69.0 million, (iv) loan to third parties net of RMB13.0 million.
Net cash used in investing activities in 2021 was RMB928.4 million, primarily attributable to (i) purchase of short-term investments
of RMB378.2 million, (ii) loan to franchisee net of RMB290.0 million, (iii) purchases of property and equipment of RMB341.7 million,
(iv) purchase of investments in equity securities of RMB8.9 million, including the strategic and financial investment in Sunkwan
Properties, (v) increase of long-term time deposits of RMB130.0 million, (vi) acquisitions, net of cash received of RMB 147.6 million,
(vii) advances for purchases of property and equipment of RMB 219.3 million, (viii) advances for acquisitions of RMB 39.5 million,
(x)loan to related parties net of RMB296.7 million, partially offset by (i) proceeds from short-term investments of RMB536.4 million,
(ii) repayment of advances for acquisitions of RMB12.2 million, (iii) repayment from advances for purchases of property and equipment
of RMB22.4 million, (iv) proceeds from disposal of equity securities of RMB 284 million. (v) proceeds from sales of long-term time
deposits of RMB50 million,(vi) repayment of loan from third parties net of RMB18.2 million.
Net cash used in investing activities in 2020 was RMB111.6 million, primarily attributable to (i) purchase of short-term investments
of RMB206.6 million, (ii) loan to franchisee net of RMB119.6 million, loan to third parties net of RMB62.0 million, (iii) purchases of
property and equipment of RMB111.9 million, (iv) purchase of investments in equity securities of RMB65.8 million, including the
strategic and financial investment in Sunkwan Properties, (v) increase of long-term time deposits of RMB30.0 million, (vi) payment for
acquisitions of RMB25.0 million, partially offset by (i) proceeds from short-term investments of RMB453.4 million, (ii) repayment of
advances for acquisitions of RMB36.4 million, (iii) repayment from a related party net of RMB11.6 million.
Financing Activities
Net cash used in financing activities was RMB341.9 million (US$49.6 million) in 2022, compared to net cash provided by financing
activities of RMB255.6 million in 2021 and net cash provided by financing activities of RMB115.5 million in 2020.
Net cash used in financing activities in 2022 was RMB341.9 million (US$49.6 million), primarily attributable to (i) repayment of
bank borrowings net of RMB306.4 million, (ii) Distribution to the shareholders of RMB41.0 million, partilly offset by proceeds from
NCI of 5.5 RMB million.
Net cash provided by financing activities in 2021 was RMB255.6 million, primarily attributable to (i) proceeds from bank
borrowings net of RMB558.0 million, (ii) proceeds from NCI of RMB17.9 million and (iii) Distribution to the shareholders of
RMB320.3 million.

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Net cash provided by financing activities in 2020 was RMB115.5 million, primarily attributable to (i) proceeds from short-term
borrowings net of RMB90.0 million and (ii) proceeds from NCI of RMB27.5 million.
Statutory Reserves
As a holding company, we rely upon dividends paid to us by our subsidiaries in the PRC to pay dividends and to finance any debt we
may incur. If our subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing
their debt may restrict their ability to pay dividends to us. In addition, our subsidiaries are permitted to pay dividends to us only out of
their accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. Pursuant to laws
applicable to entities incorporated in the PRC, each of our subsidiaries in the PRC must make appropriations from after tax profit to a
statutory surplus reserve fund. The reserve fund requires annual appropriation of 10% of after tax profit (as determined under accounting
principles generally accepted in the PRC at each year-end) after offsetting accumulated losses from prior years, until such reserve reaches
50% of the subsidiary’s registered capital. The reserve fund can only be used to increase the registered capital and eliminate further
losses of the respective companies under PRC regulations. As of December 31, 2020, 2021 and 2022, total statutory reserves of our PRC
subsidiaries were RMB70.0 million, RMB77.5 million and RMB78.3 million (US$11.4 million). These reserves are not distributable as
cash dividends, loans or advances. In addition, due to restrictions under PRC laws and regulations, our PRC subsidiaries are restricted in
their ability to transfer their net assets to the company in the form of dividend payments, loans or advances. Amounts of net assets
restricted include paid up capital and statutory reserve funds of our PRC subsidiaries amounted to RMB777.7 million, RMB936.8 million
and RMB898.6 million (US$130.3 million) as of December 31, 2020, 2021 and 2022, respectively.
Treasury Policy
As a result of practical difficulties in remitting cash by our PRC subsidiaries outside of China, we have established a treasury policy
to better utilize our financial resources and manage our cash that we generate from our operations in China. Under this policy, when our
internal cash flow and liquidity forecast indicate that we have sufficient capital resources for our operating activities and our capital
expenditure, we make liquid investments with a portion of our excess cash to achieve a better return on our assets than generating interest
on bank deposits.
Given the limited investment channels available in China, we purchase short-term wealth management products issued by
commercial banks and shares of blue chip companies listed in China’s A-Share market. Meanwhile, for the strategic purpose, we
invested in two HK listed companies. The short-term wealth management products are typically principal protected with limited risks. In
addition, we select high-quality companies with proven track records and stable operations. Among these investments, most of them are
state-owned enterprises.
As of December 31, 2020, 2021 and 2022, we had short-term investments of RMB302.0 million, RMB557.5 million and RMB186.0
million (US$27.0 million) and investments in equity securities of RMB242.4 million, RMB158.0 million and RMB41.4 million (US$6.0
million). We recorded gains from disposal of the short-term investments and investments in equity securities gains of nil and RMB2.3
million, respectively, in 2020, losses of nil and RMB0.5 million, respectively, in 2021, and gains of nil and RMB11.3 million (US$1.6
million), respectively, in 2022. Mark-to-market losses from these equity securities we recorded amounted to RMB29.6 million, RMB8.7
million and RMB13.9 million (US$2.0 million) in 2020, 2021 and 2022, respectively.
In January 2019, we declared a cash dividend of US$30.6 million, US$0.30 per ordinary share, or US$0.30 per ADS. Holders of our
ordinary shares and ADSs as of the close of trading on February 6, 2019 were entitled to such cash dividend, and we paid such dividend
in full in February 2019. In December 2019, we declared a cash dividend of US$25.5 million, US$0.25 per ordinary share, or US$0.25
per ADS. Holders of our ordinary shares and ADSs as of the close of trading on December 24, 2019 were entitled to such cash dividend,
and we paid such dividend in full in January 2020. In December 2021, we declared a cash dividend of US$0.55 per ordinary share, or
US$0.55 per ADS. Holders of our ordinary shares and ADSs as of the close of trading on December 31, 2021 were entitled to such cash
dividend, and we paid such dividend in full in January 2022.
In addition, we plan to implement a more prudent treasury policy that involves board level discussion, approval and oversight, as
well as third party professional securities trading advice. In particular, we plan to gradually liquidate our holding of our investments in
equity securities, subject to market conditions, and will put the unutilized cash in interest-bearing accounts or pursue less volatile
investment options.

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Recently Issued Accounting Standards
Please see Note 2 to our consolidated financial statements included elsewhere in this annual report.
C.
Research and Development, Patents and Licenses, etc.
Hotel Development
See “Item 4. Information on the Company—B. Business Overview—Our Technology Infrastructure” and “Item 4. Information on
the Company—B. Business Overview—Hotel Development.”
Intellectual Property
See “Item 4. Information on the Company—B. Business Overview—Intellectual Property.”
D.
Trend Information
Please refer to “—A. Results of Operations” for a discussion of the most recent trends in our services, sales and marketing by the
end of 2022. In addition, please refer to discussions included in such Item for a discussion of known trends, uncertainties, demands,
commitments or events that we believe are reasonably likely to have a material effect on our net sales and operating revenues, income
from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information to be not
necessarily indicative of our future operating results or financial condition.
E.
Critical Accounting Estimates
Critical Accounting Policies and Significant Judgements and Estimates
We prepare financial statements in accordance with accounting principles generally accepted in the United States, or U.S. GAAP,
which requires us to make judgments, estimates and assumptions that affect the reported amounts of our assets and liabilities and the
disclosure of our contingent assets and liabilities at the end of each fiscal period and the reported amounts of revenues and expenses
during each fiscal period. We evaluate these judgments and estimates based on our own historical experience, knowledge and assessment
of current business and other conditions, our expectations regarding the future based on available information and assumptions that we
believe to be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other
sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those
estimates. Some of our accounting policies require a higher degree of judgment than others in their application.
The selection of critical accounting policies and estimates, the judgments and other uncertainties affecting application of those
policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when
reviewing our financial statements. We believe the following accounting policies involve the most significant judgments and estimates
used in the preparation of our financial statements.
Revenue recognition
Our revenues from leased-and-operated hotels are primarily derived from hotel operations, including the rental of rooms and food
and beverage sales. Each of these products and services represents an individual performance obligation and, in exchange for these
services, we receive fixed amounts based on fixed rates or fixed standalone selling price. Revenue is recognized when rooms are
occupied, and food and beverages are sold. Sublease rental revenues as the respective performance obligations are derived from the
subleasing of partial space of leased-and-operated hotels and is recorded in leased-and-operated hotel revenue in the consolidated
statements of comprehensive income on a straight-line basis over the contractual lease term satisfied.

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Our revenues from franchised-and-managed hotels are derived from franchise agreements where the franchisees are required to pay
(i) an initial one-time non-refundable franchise fee, and (ii) continuing franchise fees, which mainly consist of on-going management and
service fees based on a certain percentage of the room revenues of the franchised-and-managed hotels and central reservation system
(“CRS”) usage fee based on a fixed rate per transaction. For franchised-and-managed hotels, we have a performance obligation to
provide franchisees a license to our hotel system intellectual property for use of certain of our brand names. The one-time franchise fees
are fixed consideration payable upon submission of a franchise application or renewal and are recognized on a straight-line basis over the
initial or renewal term of the franchise agreements. We do not consider this advance consideration to include a significant financing
component, since it is used to protect us from the franchisees failing to adequately complete some or all obligations under the contract.
The continuing fees represent variable consideration, as the transaction price is based on a percentage of underlying service revenue is
recognized by the franchisees’ operations. We recognize continuing franchise fees on a monthly basis over the term of the agreement as
those amounts become payable.
In addition, we designate hotel managers to certain hotels and accounts for hotel manager fees related to the hotels under the
franchise program as revenues. Pursuant to the franchise-and-management agreements, we charge the franchisees fixed hotel manager
fees to compensate us for the franchised-and-managed hotel managers’ salaries, social welfare benefits and certain other out-of-pocket
expenses as incurred. The hotel manager fee is recognized as revenue on a monthly basis.
We invite our customers to participate in a membership program with four tiers of membership – E-membership, R-membership,
gold membership and platinum membership. A one-time membership fee is charged for new members except for the E-membership. The
membership automatically expires after two years in the event of non-usage and is automatically renewed if used at least once within a
two-year period. Members enjoy discounts on room rates, priority in hotel reservation, and accumulate membership points for their paid
stays, which can be redeemed for membership upgrades, room night awards and other gifts within two years after the points are earned.
Membership fees from our membership program are earned and recognized on a straight-line basis over the expected membership
duration of the different membership levels. Such duration is estimated based on our experience and is adjusted on a periodic basis to
reflect changes in membership retention. The membership duration is estimated to be three to five years depending on membership level.
Membership points earned by members represent a material right to free or discounted goods or services in the future. The
membership program has one performance obligation that consists of marketing and managing the program and arranging for award
redemptions by members. The amount of revenue we recognize upon point redemption is impacted by the estimate of the “breakage” for
points that members will never redeem. We estimate breakage based on our historical experience and expectations of future member
behavior and will true up the estimated breakage at the end of each period. We recognized revenue net of reimbursement paid to
franchisees as our performance obligation is to facilitate the transaction between the member and the franchised and managed hotels.
Income taxes
We account for income taxes using the liability method, where deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which temporary differences are expected to be recovered or settled. A valuation allowance is
provided to reduce the amount of deferred tax assets if it is considered more likely than not that some or all of the deferred tax assets will
not be realized.
We recognize the benefit of a tax position if the tax position is more likely than not to prevail based on the technical merits of the tax
position. Tax positions that meet the “more likely than not” threshold are measured at the largest amount of tax benefit that has a greater
than fifty percent likelihood of being realized upon settlement. We re-assessed our liability for unrecognized tax benefits that may be
affected by changing interpretations of laws, rulings by tax authorities, changes and/or developments with respect to tax audits, and
expiration of the statute of limitations. Changes in recognition and measurement estimates are recognized in the period in which the
changes occur. We account for interest and penalties related to an uncertain tax position as a component of income taxes.

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Loans receivable
Loans receivable are carried at the original loan principal and accrued interest based on the contract rate, less an allowance for
uncollectible accounts, as appropriate. We classified loans receivable as long-term or short-term investments according to their
contractual maturity. The allowance for uncollectible accounts is estimated based on an assessment of the payment history, the existence
of collateral, current information and events, and the facts and circumstances around the credit risk of the debtors.

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Business combinations
We account for all business combinations under the purchase method in accordance with ASC 805, Business Combinations. The cost
of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity
instruments issued. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and
contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent
of any noncontrolling interests. The excess of (i) the total of the cost of the acquisition, fair value of the noncontrolling interests and
acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the
acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the identifiable net assets of the acquiree, the
difference is recognized directly in earnings.
The determination and allocation of fair values to the identifiable net assets acquired, liabilities assumed and noncontrolling interest
is based on various assumptions and valuation methodologies requiring considerable judgment. The most significant variables in these
valuations are discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions
and estimates used to determine the cash inflows and outflows. We determine discount rates to be used based on the risk inherent in the
acquiree’s current business model and industry comparisons. Although we believe that the assumptions applied in the determination are
reasonable based on information available at the date of acquisition, actual results may differ from forecasted amounts and the
differences could be material.
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.
Directors and Senior Management
The following table sets forth certain information relating to our current directors, executive officers and senior management.
Name
    
Age
     Position/Title
 
Alex S. Xu (
)
59
Chairman and chief executive officer
Gregory James Karns
67
Director, general counsel
Bingwu Xie (
)
53
Independent director
Dong Li (
)
47
Independent director
Yanjie (Catherine) Zhu 
40
Independent director
Yiping Yang (
)
40
Chief financial officer
Mr. Alex S. Xu (
) is our founder and has served as our chairman of the board of directors and chief executive officer since
2004. Mr. Xu is the founder of American Pacific Homes, Inc., a leading home builder in California and transformed now to a hotel
franchisor and operator in the Western US, and has served as its chairman since 1997. He also has served as a managing director of
Foothill Medical Centers since 1997. Prior to founding our company, Mr. Xu served as the chief operating officer of U.S. Uni-President
Investment and Development from 1995 to 1997. From 1994 to 1996, Mr. Xu served as the director of finance with Santa Anita Realty
Enterprises, Inc. From 1990 to 1994, Mr. Xu worked as the accounting and corporate data service manager for Broadway Stores Inc.
Mr. Xu received a bachelor’s degree in engineering from Beijing Institute of Technology in 1984 and two master’s degrees in computer
engineering and in applied mathematics from the University of Southern California in 1990.

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Mr. Gregory James Karns has served as a director and general counsel of our company since 2005. Mr. Karns is a partner with the
U.S. law firm of Cox, Castle & Nicholson LLP, where he has worked since 1989. From 1985 to 1989, Mr. Karns worked as an associate
with the law firm of Jones, Day, Reavis & Pogue, and Mr. Karns began his legal career in 1983 as an associate with the law firm of
Kindel & Anderson. Mr. Karns received a bachelor’s degree in political science from the University of California in 1980, and his juris
doctor degree from Loyola Law School in 1983
Mr. Bingwu Xie (
) has served as an independent director of our company since 2011. Mr. Xie is the founder and owner and
has served as a director of Global Standard Investment Management Co., Ltd. since 2009 and as a director of ValueAlert Co, Ltd. since
2005. From 2014 to 2016, Mr. Xie served as a partner of Gopher Asset Management Limited and as the deputy chief investment officer
of Noah Holdings (Hong Kong) Limited. From 2009 to 2014, Mr. Xie served as a managing director in the mergers and acquisitions
department of ZEG Capital Management Co., Ltd. with Zhongzhi Enterprise Group, and as corporate vice president in charge of the real
estate finance division of Zhongrong International Trust Co., Limited. From 2000 to 2009, Mr. Xie held various positions with Lehman
Brothers in Japan and Hong Kong as a vice president and senior vice president of the investment management division, as a vice
president in the fixed income division, and served as China country head of the real estate private equity division since December 2006.
Mr. Xie received a bachelor’s degree in English for science and technology from Harbin Institute of Technology in 1993 and a master’s
degree in international development (economics) from the International University of Japan in 1998.
Mr. Dong Li (
) has served as an independent director of our company since March 2018. Mr. Li has served as the chief financial
officer of Tim Hortons China, a premium coffee chain network in China since September 2021. Mr. Li also served as an independent
director of Boqii Holding Ltd (China’s leading pet-focused platform listed on the NYSE, ticker symbol: BQ) since September 2020, as
an independent non-executive director of Helens International Holdings Company Limited (China’s largest bar chain network listed on
the Hong Kong Stock Exchange, ticker symbol: 09869) since August 2021, as an independent non-executive director of Sinosoft
Technology Group Limited (a leading government big data and related services provider listed on the Hong Kong Stock Exchange, ticker
symbol: 01297) since February 2023, as an independent non-executive director of Logory Logistics Technology Co., Ltd (a leading end-
to-end digital freight transportation services provider in China listed on the Hong Kong Stock Exchange, ticker symbol: 02482) since
March 2023 and as an independent non-executive director of ZJLD Group Inc (a leading baijiu company in China devoted to offering
premium baijiu products featuring sauce aroma profile and listed on the Hong Kong Stock Exchange, ticker symbol: 06979) since April
2023. Prior to joining Tim Hortons China, Mr. Li served as the chief financial officer for several companies, including Ximalaya Inc.,
one of China’s largest online audio platforms from September 2019 to September 2021; OneSmart International Education Group
Limited, a diversified premium K-12 education company in China listed on the New York Stock Exchange (ticker symbol: ONE) from
July 2017 to June 2019; Pegasus Media Group Limited, a company focuses on movie and TV show production, investment, licensing,
marketing and derivatives from April 2016 to April 2017; and Ecovacs Robotics Holdings Limited, a consumer robotics company in
China listed on the Shanghai Stock Exchange (ticker symbol: 603486) from March 2015 to February 2016. From September 2008 to
February 2015, Mr. Li worked as an associate and later vice president in investment banking at Bank of America Merrill Lynch and
ICBC International in Hong Kong. Prior to that, Mr. Li worked in KPMG’s auditing practice group from August 1999 to April 2006 in its
Beijing and Silicon Valley offices, respectively. Mr. Li received a bachelor’s degree in accounting from School of Economics and
Management, Tsinghua University in July 1999, as well as a master’s degree in business administration in finance from Kellogg School
of Management, Northwestern University in June 2008. Mr. Li is a member of the Chinese Institute of Certified Public Accountants and
the Certified General Accountants Association of Canada.
Ms. Yanjie (Catherine) Zhu (
) has served as an independent director of our company since December 2021. Ms. Zhu has
served as the finance director of Baozun Inc. (Nasdaq: BZUN and HKEX: 9991) (“Baozun”) since November 2020. Prior to joining
Baozun, she served as the finance director for Cue & Co., Group Ltd. and then IBR between April 2018 and October 2020. From
September 2016 to February 2018, Ms. Zhu worked as a finance controller with Xperience Communications (Shanghai) Co., Ltd.
Between March 2013 and September 2016, she worked as a finance manager first with Lend Lease Project Management & Construction
(Shanghai) Co., Ltd., and then with Porsche Centre Shanghai Waigaoqiao Limited. Prior to that, Ms. Zhu worked as an audit manager
with KPMG in its Shanghai office from August 2005 to February 2013. Ms. Zhu received a bachelor’s degree in business administration
from Shanghai International Studies University in July 2005. Ms. Zhu is a member of the Chinese Institute of Certified Public
Accountants and the Institute of Internal Auditors.

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Dr. Yiping Yang (
) has served as our chief financial officer since January 2019, a director of our company from January 2018
to March 2018, as our vice president for operations since 2017, and as our vice president for sales and marketing since 2016. Dr. Yang
has worked at our company as a secretary of general managers and a group marketing director since 2016, with responsibility for sales
channels, customer reservation services, online promotion, public relations, and graphic design. She initially joined our company as
executive assistant to the chairman. From 2011 to 2015, Dr. Yang held various roles as a marketing director, sales manager, and assistant
general manager with Jingfeng Industry Co., Ltd., Jiangxi, a chain manufacturing company. Dr. Yang received a bachelor’s degree in
applied mathematics from Shanghai Jiao Tong University in 2004 and passed the qualifying exam for the doctoral program in 2006. She
received a doctoral degree in financial engineering from the Chinese University of Hong Kong in 2010.
B.
Compensation
For the year ended December 31, 2022, we paid an aggregate of approximately US$0.5 million in cash to our executive officers and
directors.
Employment Agreements
We have entered into employment agreements with all of our executive officers. Under these agreements, each of our executive
officers is employed for a specified time period. We may terminate his or her employment for cause at any time, with prior written
notice, for certain acts of the employee, including but not limited to a conviction to a felony, or willful gross misconduct by the employee
in connection with his employment, and in each case if such acts have resulted in material and demonstrable financial harm to us. An
executive officer may, with prior written notice, terminate his or her employment at any time for any material breach of the employment
agreement by us that is not remedied promptly after receiving the remedy request from the employee. Furthermore, either party may
terminate the employment agreement at any time without cause upon advance written notice to the other party. Upon termination, the
employee is generally entitled to a severance pay of at least one month’s salary.
Each executive officer has agreed to hold, both during and subsequent to the terms of his or her agreement, in confidence and not to
use, except in pursuance of his or her duties in connection with the employment, any of our confidential information, technological
secrets, commercial secrets and know-how. Our executive officers have also agreed to disclose to us all inventions, designs and
techniques resulted from work performed by them, and to assign us all right, title and interest of such inventions, designs and techniques.
Moreover, each of our executive officers has agreed that during the term of his or her employment with us and three years thereafter:
(i) not to serve, invest or assist in any business that competes with our business; and (ii) not to solicit any of our officers, directors,
employees or agents.
Share Incentive Plan
2018 Share Incentive Plan
In January 2018, our board of directors adopted our 2018 share incentive plan to attract and retain personnel, provide additional
incentives to our employees, directors and consultants, and promote the success of our business. The 2018 share incentive plan provides
for the grant of options, restricted shares and restricted share units, collectively referred to as awards. Our board of directors has
authorized the issuance of up to 9,000,000 Class A ordinary shares upon exercise of awards granted under our 2018 share incentive plan.
Plan Administration
The compensation committee of our board of directors, or before the compensation committee is established, the chairman of our
board of directors, will administer the 2018 share incentive plan. The compensation committee or the chairman of the board of directors,
as appropriate, will determine the participants to receive awards, the type and number of awards to be granted and the terms and
conditions of each award grant.

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Award Agreements
Awards granted under our 2018 share incentive plan are evidenced by an award agreement that sets forth the terms, conditions and
limitations for each grant, which may include the term of the award, the provisions applicable in the event of the grantee’s employment
or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.
Transfer Restrictions
The right of a grantee in an award granted under our 2018 share incentive plan may not be transferred in any manner by the grantee
other than by will or the laws of succession and, with limited exceptions, may be exercised during the lifetime of the grantee only by the
grantee.
Option Exercise
The term of options granted under the 2018 share incentive plan may not exceed six years from the date of grant. The consideration
to be paid for our ordinary shares upon exercise of an option or purchase of shares underlying the option may include cash, check or
other cash-equivalent, ordinary shares, consideration received by us in a cashless exercise, or any combination of the foregoing methods
of payment.
Acceleration upon a Change of Control
If a change of control of our company occurs, the award agreement may provide for acceleration of the vesting of the awards
pursuant to the agreement. Our compensation committee or our board of directors may (i) cancel the awards for fair market value,
(ii) provide for issuance of substitute awards or (iii) provide that for at least 15 days prior to the change of control the awards shall be
exercisable as to all shares subject thereto and such awards shall terminate after the change of control.
Termination and Amendment
Unless terminated earlier, our 2018 share incentive plan will expire after ten years. Our board of directors has the authority to amend
or terminate our 2018 share incentive plan, subject to shareholder approval to the extent necessary to comply with applicable law.
Shareholders’ approval is required for any amendment to the 2018 share incentive plan that (i) increases the number of ordinary shares
available under the 2018 share incentive plan or changes the maximum number of shares for which awards may be granted to any
participant or, (ii) diminish any of the rights of the participant under any award previously granted to such participant under the plan
without such participant’s consent.

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106
Granted Options
Our board of directors has only granted options to participants in our 2018 share incentive plan. In January 2018, we granted
1,703,000 options to purchase our Class A ordinary shares to certain of our employees and directors. All of these options were subject to
applicable vesting schedules. As of the date of the annual report, there were (i) 1,022,000 Class A ordinary shares issuable upon the
exercise of outstanding options and (ii) 7,978,000 Class A ordinary shares reserved for future issuance. The table below summarizes, as
of the date of this annual report, the options we have granted to our directors and executive officers under our 2018 share incentive plan.
    
Number of
    
    
    
shares underlying     Exercise price
    
Name
     options granted       (US$ per share)
Grant date
Expiration date
Alex S. Xu
 
*
 14.00
(1) January 15, 2018
January 15, 2024
Bingwu Xie
 
*
 14.00
(1) January 15, 2018
January 15, 2024
Dong Li
 
*
 14.00
(1)
March 13,2018
March 13,2024
Yanjie (Catherine) Zhu
 
*
 14.00
(1)December 31,2021
December 31,2027
Yiping Yang
 
*
 12.00
January 15, 2018
January 15, 2024
*
Less than 1% of our total shares outstanding.
(1)
Equals to the public offering price. For services as directors of our Company.
(2)
For services as general counsel of our Company.
C
Board Practices
Board of Directors
A company of which more than 50% of the voting power is held by a single person or entity is considered a “controlled company”
under the NYSE Listed Company Manual. A controlled company need not comply with the NYSE corporate governance rules requiring
a board of directors to have a majority of independent directors, to have an independent compensation committee, and to have
independent nomination/corporate governance committees. As long as GTI or Mr. Alex S. Xu owns at least 50% of the voting power of
our company, we will be a “controlled company” as defined under the NYSE Listed Company Manual. We have no current intention to
rely on the controlled company exemption.
Our board of directors has established an audit committee, a compensation committee, and a nominating and corporate governance
committee. As a foreign private issuer, we are permitted to follow home country corporate governance practices under the Corporate
Governance Rules of the New York Stock Exchange.
Committees of the Board of Directors
Audit Committee
Our audit committee consists of Bingwu Xie, Dong Li and Yanjie (Catherine) Zhu. Bingwu Xie is the chairman of our audit
committee. Dong Li satisfies the criteria of an audit committee financial expert as set forth under the applicable rules of the SEC. Each of
Bingwu Xie, Dong Li and Yanjie (Catherine) Zhu satisfies the requirements for an “independent director” within the meaning of Section
303A of the Corporate Governance Rules of the New York Stock Exchange, or the NYSE, and to meet the criteria for independence set
forth in Rule 10A-3 of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act. Our audit committee consists solely
of independent directors.
The audit committee oversees our accounting and financial reporting processes and the audits of our financial statements. Our audit
committee is responsible for, among other things:
●
selecting, and evaluating the qualifications, performance and independence of, the independent auditor;
●
pre-approving or, as permitted, approving auditing and non-auditing services permitted to be performed by the independent
auditor;

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●
considering the adequacy of our internal accounting controls and audit procedures;
●
reviewing with the independent auditor any audit problems or difficulties and management’s response;
●
reviewing and approving related party transactions between us and our directors, senior management and other persons
specified in Item 6B of Form 20-F;
●
reviewing and discussing the quarterly financial statements and annual audited financial statements with management and the
independent auditor;
●
establishing procedures for the receipt, retention and treatment of complaints received from our employees regarding
accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of
concerns regarding questionable accounting or auditing matters;
●
meeting separately, periodically, with management, internal auditors and the independent auditor; and
●
reporting regularly to the full board of directors.
Compensation Committee
Our compensation committee consists of Gregory James Karns, Alex S. Xu and Bingwu Xie. Gregory James Karns is the chairman
of our compensation committee. Bingwu Xie satisfies the requirements for an “independent director” within the meaning of
Section 303A of the New York Stock Exchange Corporate Governance Rules.
Our compensation committee will be responsible for, among other things:
●
reviewing, evaluating and, if necessary, revising our overall compensation policies;
●
reviewing and evaluating the performance of our directors and executive officers and determining the compensation of our
directors and executive officers;
●
reviewing and approving our executive officers’ employment agreements with us;
●
determining performance targets for our executive officers with respect to our incentive compensation plan and share incentive
plan;
●
administering our share incentive plan in accordance with the terms thereof; and
●
carrying out such other matters that are specifically delegated to the compensation committee by our board of directors from
time to time.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Alex S. Xu, Gregory James Karns and Yanjie (Catherine) Zhu.
Alex S. Xu is the chairman of our nominating and corporate governance committee. Yanjie (Catherine) Zhu satisfies the requirements for
an “independent director” within the meaning of Section 303A of the New York Stock Exchange Corporate Governance Rules.
Our nominating and corporate governance committee will be responsible for, among other things:
●
selecting the board nominees for election by the shareholders or appointment by the board;
●
periodically reviewing with the board the current composition of the board with regards to characteristics such as independence,
knowledge, skills, experience and diversity;

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●
making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees
of the board; and
●
advising the board periodically with regards to significant developments in corporate governance law and practices as well as
our compliance with applicable laws and regulations, and making recommendations to the board on corporate governance
matters.
Duties of Directors
Under Cayman Islands law, all of our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act
honestly and a duty to act in good faith and in a manner they believe to be in our best interests. Our directors must also exercise their
powers only for a proper purpose. Our directors also have a duty to exercise the skill they actually possess and such care and diligence
that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must
ensure compliance with our memorandum and articles of association, as amended and restated from time to time. Our company has the
right to seek damages if a duty owed by any of our directors is breached. In limited exceptional circumstances, a shareholder may have
the right to seek damages in our name if a duty owed by our directors is breached. You should refer to “Description of Share Capital —
Differences in Corporate Law” for additional information on our standard of corporate governance under Cayman Islands law.
A director who is in any way, whether directly or indirectly, interested in a contract or proposed contract or arrangement with our
company is required to declare the nature of his interest at a meeting of our directors. A director may vote in respect of any contract,
proposed contract, or arrangement notwithstanding that he may be interested therein, and if he does so his vote shall be counted and he
may be counted in the quorum at any meeting of our directors at which any such contract or proposed contract or arrangement is
considered. Our directors may exercise all the powers of our company to borrow money, and to mortgage or charge its undertaking,
property and uncalled capital, and issue debentures, debenture stock or other securities whenever money is borrowed or as security for
any debt, liability or obligation of the company or of any third party.
Terms of Directors and Officers
Our directors may be elected by a resolution of our board of directors, or by an ordinary resolution of our shareholders, pursuant to
our amended and restated memorandum and articles of association. Each of our directors will hold office until his or her successor takes
office or until his or her earlier death, resignation or removal. A director will cease to be a director if, among other things, the director
(i) becomes bankrupt or makes any arrangement or composition with his creditors, (ii) dies, or is found to be or becomes of unsound
mind, (iii) resigns his office by notice in writing to the company, (iv) without special leave of absence from our board, is absent from
three consecutive board meetings and our directors resolve that his office be vacated, (v) is prohibited by any applicable law from being a
director, or (vi) is removed from office pursuant to any other provision of our amended and restated memorandum and articles of
association. Our officers are elected by and serve at the discretion of the board of directors.
Members of our board of directors will be nominated by the nominating and corporate governance committee of the board. Director
nominees will be elected by a simple majority vote of shareholders at our annual general meeting.
D.
Employees
See “Item 4. Information on the Company—B. Business Overview—Employees.”
E.
Share Ownership
The following table sets forth information with respect to beneficial ownership of our ordinary shares as of December 31, 2022 by:
●
each of our directors and executive officers;
●
our directors and executive officers as a group; and

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●
GTI, which is the only shareholder known to us to own beneficially 5.0% or more of our shares.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to,
or the power to receive the economic benefit of ownership of, the securities. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days,
including through the exercise of any option or other right or the conversion of any other security.
The calculations in the table below are based on (i) 67,416,046 Class A ordinary shares and (ii) 34,762,909 Class B ordinary shares
outstanding as of December 31, 2022.
Beneficially Owned
     Percentage of
Ordinary Shares
 Votes Held
    
Number
    
%  
    
%
Directors and Executive Officers:
  
  
  
Alex S. Xu(1)
 
 91,352,209  
 89.5  
 93.7
Bingwu Xie
 
 —  
 —  
 —
Dong Li
 
 —  
 —  
 —
Yanjie (Catherine) Zhu
 
 —  
 —  
 —
Yiping Yang
 
 —  
 —  
 —
All directors and executive officers as a group
 
 91,352,209  
 89.5  
 93.7
Principal Shareholders:
 
   
  
GreenTree Inns Hotel Management Group, Inc.(2)(3)(4)
 
 91,352,209  
 89.5  
 93.7
Allspring Global Investments Holdings, LLC(5)
 
 6,067,307  
 5.9  
 3.5
Notes:
(1)
Represents (i) 56,589,300 Class A ordinary shares and (ii) 34,762,909 Class B ordinary shares held by GTI. Mr. Alex S. Xu is considered to beneficially
own all the shares held by GTI by virtue of (i) his director position on GTI’s 3-member board of director; and (ii) his 83.9% voting power in GTI. As a
result, Mr. Alex S. Xu has the power to (i) vote, or to direct the voting of, and (ii) dispose, or to direct the disposition of, all the shares held by GTI.
(2)
as of December 31, 2022. As of the date of this annual report, all pledge ordinary shares has been released.
(3)
GTI’s ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares are entitled to one vote per
share, while holders of Class B ordinary shares are entitled to three (3) votes per share. Currently, GTI has 33,414,026 Class A ordinary shares and
57,938,182 Class B ordinary shares issued and outstanding.
(4)
Mr. Alex S. Xu, directly or indirectly through entities controlled by him, holds 57,938,182 Class B ordinary shares of GTI, including (a) 36,340,682 Class B
ordinary shares of GTI held by Mr. Xu’s family trust, for which Mr. Xu and his wife are settlors and trustees and accordingly, Mr. Xu has voting and
dispositive control, (b) 17,047,500 Class B ordinary shares of GTI held by GreenTree Hotel Management, Inc., a company incorporated in Samoa and to
which Mr. Xu is the sole shareholder and exercises sole voting and dispositive control, and (c) 4,550,000 Class B ordinary shares of GTI held by Keystone
Pacific, LLC, a California limited liability company whose sole members are Mr. Xu, individually, and Mr. Xu’s family trust, and accordingly to which Mr.
Xu exercises voting and dispositive control, which in the aggregate result in Mr. Xu’s 83.9% voting power in GTI. Mr. Kent Chien Te Wu directly or
indirectly through entities controlled by him, holds 10,266,667 Class A ordinary shares of GTI, including (a) 9,666,667 Class A ordinary shares of GTI
through Wu Green Tree Limited Partnership, a California limited partnership (“Wu Green Tree”), and (b) 600,000 Class A ordinary shares of GTI
individually. The business office of Mr. Wu and Wu Green Tree is 260 Newport Center Drive, Newport Beach, CA 92660. The voting and dispositive power
over the Class A ordinary shares of GTI held by Wu Green Tree are controlled by the two general partners of Wu Green Tree, Kent Chien Te Wu, and
Maggie Tzu Chiang Wu, his wife, and accordingly Mr. Wu has the power to (i) vote, or direct the voting of, and (ii) dispose, or direct the disposition of, all
GTI shares held by Wu Green Tree. Other than Mr. Xu and Mr. Wu, no other shareholder is known to us to own beneficially 5.0% or more of the shares of
GTI.
(5)
The number of ordinary shares beneficially owned is as of December 31, 2022, as reported in Amendment No. 1 to Schedule 13G filed on January 13, 2023
by Allspring Global Investments Holdings, LLC, a Delaware limited liability company (“AGIH”), and consists of 6,067,307 Class A ordinary shares. The
principal business office of AGIH is 525 Market St, 10th Fl, San Francisco, CA 94105.
To our knowledge, as of December 31, 2022, 10,826,746 Class A ordinary shares or 10.5% of our outstanding ordinary shares were
held by record holders in the United States, including Deutsche Bank Trust Company Americas, the depositary bank for our ADR
program. Because many of these shares are held by brokers or other nominees, we cannot ascertain the exact number of beneficial
shareholders with addresses in the United States.

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110
GTI acquired its shares in offerings that were exempted from registration under the Securities Act of 1933, as amended, or the
Securities Act, because such offerings involved either private placements or offshore sales to non-U.S. persons.
We are not aware of any arrangement that may at a subsequent date, result in a change of control of our company.
F.
Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
Not applicable.
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.
Major Shareholders
See “Item 6. Directors, Senior Management and Employees—E. Share Ownership”
B.
Related Party Transactions
Employment Agreements
See “Item 6. Directors, Senior Management and Employees—B. Compensation—Employment Agreements.”
Share Incentive Plan
See “Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plan.”
Other Transactions with Related Parties
Transactions with GTI
In 2019, we made a bridge loan to GTI together with Aotao and Da Niang Group for the renewal of the aforementioned merger and
acquisition loan in 2016 at the request of the lending banks. The outstanding amount of the loan as of December 31, 2019 was RMB8.4
million with an interest rate of 4.35% per annum, which was fully settled in April 2020.
In 2021, we made a bridge loan to GTI together with Aotao and Da Niang Group for the renewal of the aforementioned merger and
acquisition loan in 2016 at the request of the lending banks. The outstanding amount of the loan as of December 31, 2021 was RMB
206.3 million with an interest rate of 4.35% per annum.
In 2022, we made a bridge loan, with an interest rate of 4.35% per annum, to GTI for repayment of an Euro denominated loan from
Pudong Development Bank, which was initially used for the acquisition of Da Niang Dumplings from a third party, The outstanding
amount of loans, including those incurred in 2021, as of December 31, 2022 was RMB326.4 million. In March, 2023, the outstanding
amount of loans payable was offset against a portion of the purchase price paid by us for the acquisition of Da Niang Dumplings and
Bellagio.
Transactions with Aotao and its subsidiaries
Shanghai Aotao Industrial Co., Ltd., or Aotao, is a catering management company controlled by GTI. In 2019, we made a bridge
loan to Aotao in together with GTI and Da Niang Group, for the renewal of a merger and acquisition loan at the request of the lending
banks. The outstanding amount of the loan as of December 31, 2019 was RMB20.1 million with an interest rate of 4.35% per annum,
among which RMB12.2 million (US$1.9 million) was settled in April 2020.
In 2020, we made a bridge loan of RMB479 million (US$73.5 million) to Aotao, for the renewal of a loan in the catering sector with
an interest rate of 4.35% per annum. The outstanding loan was settled in December 2020. In 2020, Aotao provided advertising promotion
services to us in the aggregate amount of RMB3.9 million (US$0.6 million).

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In 2021, we made a bridge loan of RMB 186 million (US$29.2 million) to Aotao, for the renewal of a loan in the catering sector
with an interest rate of 4.35% per annum.The outstanding amount of the loan as of December 31, 2021 was RMB 65.1 million (US$10.2
million) . In 2021, Aotao provided advertising promotion services to us in the aggregate amount of RMB6.5 million (US$1.0 million).
As of December 31, 2022, the outstanding amount of the loan was still RMB 65.1 million.In 2022, Aotao provided advertising
promotion services to us in the aggregate amount of RMB5.6 million (US$0.8 million).
Transactions with Da Niang Group
Da Niang Dumpling Catering Group Co., Ltd., together with its subsidiaries, or Da Niang, is a catering management company
controlled by GTI. In 2019, we made a bridge loan to Da Niang Group in together with GTI and Aotao, for the renewal of a merger and
acquisition loan at the request of the lending banks, which amount was repaid in full by December 31, 2019. We also purchased service
from Da Niang Group in the amount of RMB339 thousand in 2019.
In 2020, we made a bridge loan of RMB40 million (US$6.13 million) to Da Niang Group, for the renewal of a loan with an interest
rate of 4.35% per annum. The outstanding loan was settled in December 2020. In 2020, sublease revenue generated from Da Niang
Group was RMB36 thousand (US$0.01 million). We also purchased services from Da Niang Group in the amount of RMB724 thousand
(US$0.11 million) in 2020.
In 2021, we made a bridge loan of RMB39.8 million (US$6.2 million) to Da Niang Group, for the renewal of a loan with an interest
rate of 4.35% per annum. The outstanding loan was settled in December 2021. In 2021, sublease revenue generated from Da Niang
Group was RMB27 thousand (US$4.2 thousand). We also purchased services from Da Niang Group in the amount of RMB221 thousand
(US$34.7 thousand) in 2021.
Transactions with Shanghai JYHM Restaurant Management Co., Ltd. (“JYHM”)
Shanghai JYHM Restaurant Management Co., Ltd., or JYHM, is a catering management company controlled by GTI. In 2019, we
collected rental from JYHM in advance, and the outstanding amount due to JYHM as of December 31, 2019 was RMB312 thousand. We
also purchased service from JYHM of RMB18 thousand in 2019.
In 2020, sublease revenue generated from JYHM was RMB284 thousand (US$0.04 million). We also purchased service from JYHM
of RMB40 thousand (US$0.01 million) in 2020.
In 2021, sublease revenue generated from JYHM was RMB261 thousand (US$ 41 thousand). We also purchased service from
JYHM of RMB668 thousand (US$0.1 million) in 2021.
In 2022, sublease revenue generated from JYHM was RMB48 thousand (US$7 thousand). We also purchased service from JYHM of
RMB832 thousand (US$121 thousand) in 2022.
Transactions with Napa Infinity Winery (Shanghai) Inc.
Napa Infinity Winery (Shanghai) Inc., or Napa, is a wine distributor controlled by the brother of Mr. Alex S. Xu. We made advances
to Napa for working capital purposes from time to time. In 2019, we made purchases of wine with Napa in the aggregate amount of
RMB3.6 million, which was settled by offering the advances we made to Napa. In 2019, we also generated service revenue from Napa of
RMB2.4 million by offering design service and promotion service on the 168 mall from the Group. In 2020, we purchased wine from
Napa in the aggregate amount of RMB2.1 million (US$0.3 million). In 2021, we purchased wine from Napa in the aggregate amount of
RMB2.5 million (US$0.4 million). In 2022, we purchased wine from Napa in the aggregate amount of RMB3.7 million(US$0.5 million).

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Transactions with Yibon
Amount due to Yibon of RMB3.2 million comprised of receipts on behalf of Yibon which were unsecured, interest free, and
repayable upon demand. We also generated franchise revenue from Yibon of RMB681 thousand in 2019. We generated franchise revenue
from Yibon of RMB852 thousand (US$0.13 million) in 2020. In 2021, we generated franchise revenue from Yibon of RMB 1.3 million
(US$0.2 million). In 2022, we generated franchise revenue from Yibon of RMB 1.3 million (US$0.2 million).
Transactions with Beifu Hong Kong Industrial Co.,
Beifu Hong Kong Industrial Co., or Beifu HK, is a catering management company controlled by GTI. In 2021, we made a bridge loan
of RMB 169.5 million (US$26.6 million) to Beifu HK, for the renewal of a loan in the catering sector with an interest rate of 4.35% per
annum. The outstanding amount of the loan as of December 31, 2021 was RMB 26.2 million with an interest rate of 4.35% per annum.
The outstanding amount of the loan as of December 31, 2022 was RMB 26.2 million.
Transactions with Steigenberger (Beijing) Hotel Management Co., Ltd.
Steigenberger (Beijing) Hotel Management Co., Ltd., or Steigenberger, is an equity investee of ours. In 2017, we made a loan to
Steigenberger, and the outstanding amount of such loan as of December 31, 2017, 2018 and 2019 was RMB225.0 thousand, RMB225.0
thousand and RMB225.0 thousand, respectively. We have disposed our equity investment in Steigenberger in December 2019. The
outstanding loan was settled in April 2020.
C.
Interests of Experts and Counsel
Not applicable.
ITEM 8.
FINANCIAL INFORMATION
A.
Consolidated Statements and Other Financial Information
Please refer to Item 19 for a list of our annual consolidated financial statements filed as part of this annual report on Form 20-F.
Legal Proceedings
See “Item 4. Information on the Company—B. Business Overview—Legal Proceedings.”
Dividend Policy and Distributions
In January 2019, we declared a cash dividend of US$0.30 per ordinary share, or US$0.30 per ADS. Holders of our ordinary shares
and ADSs as of the close of trading on February 6, 2019 were entitled to such cash dividend, and we paid such dividend in full in
February 2019. In December 2019, we declared a cash dividend of US$0.25 per ordinary share, or US$0.25 per ADS. Holders of our
ordinary shares and ADSs as of the close of trading on December 24, 2019 were entitled to such cash dividend, and we paid such
dividend in full in January 2020. In December 2021, we declared a cash dividend of US$0.55 per ordinary share, or US$0.55 per ADS.
Holders of our ordinary shares and ADSs as of the close of trading on December 31, 2021 were entitled to such cash dividend, and we
paid such dividend in full in January 2022.
We intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business. Our board of
directors has discretion as to whether to distribute any future dividends, subject to certain requirements of Cayman Islands law. See
“Item 3. Key Information — D. Risk Factors — Risks Related to Our ADSs — We may not pay further dividends to our public
shareholders in the foreseeable future, so you should rely on price appreciation of our ADSs for return on your investment.”

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Subject to any rights and restrictions for the time being attached to any shares, our directors may from time to time declare dividends
and other distributions on shares in issue and authorize payment of the same out of the funds of our company lawfully available therefor.
In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by
our directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium, provided
that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the
ordinary course of business. Even if our directors decide to pay dividends, the form, frequency and amount of dividends will be based on
a number of factors, including our future operations and earnings, capital requirements and surplus, general financial condition,
contractual restrictions and other factors that the board of directors may deem relevant. If we pay any dividends on our shares, we will
pay those dividends which are payable in respect of the underlying Class A ordinary shares represented by our ADSs to the depositary, as
the registered holder of such Class A ordinary shares, and the depositary then will pay such amounts to our ADS holders in proportion to
the underlying Class A ordinary shares represented by the ADSs held by such ADS holders, subject to the terms of the deposit
agreement, including the fees and expenses payable thereunder. Cash dividends on our Class A ordinary shares will be paid in U.S.
dollars.
We are a holding company incorporated in the Cayman Islands. In order for us to distribute dividends to our shareholders and ADS
holders, we may need to rely on dividends distributed by our subsidiaries in China. Distributions from our subsidiaries in China to us
may be subject to various local taxes, such as withholding tax. In addition, regulations in China currently permit payment of dividends of
a Chinese company only out of accumulated distributable after-tax profits as determined in accordance with its articles of association and
the accounting standards and regulations in China.
B.
Significant Changes
We have not experienced any significant changes since the date of our audited consolidated financial statements included in this
annual report.
ITEM 9.
THE OFFER AND LISTING
A.
Offer and Listing Details
Our ADSs, each representing one of our Class A ordinary shares, have been listed on the New York Stock Exchange since March 27,
2018 under the symbol “GHG.”
B.
Plan of Distribution
Not applicable.
C.
Markets
Our ADSs, each representing one of our Class A ordinary shares, have been trading on the New York Stock Exchange since
March 27, 2018 under the symbol “GHG.”
D.
Selling Shareholders
Not applicable.
E.
Dilution
Not applicable.
F.
Expenses of the Issue
Not applicable.

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ITEM 10.
ADDITIONAL INFORMATION
A.
Share Capital
Not applicable.
B.
Memorandum and Articles of Association
We incorporate by reference into this annual report the description of our amended and restated memorandum and articles of
association contained in our Form F-1 registration statement (File No. 333-223261), as amended, initially filed with the Securities and
Exchange Commission on February 27, 2018. Our shareholders adopted our amended and restated memorandum and articles of
association on March 11, 2018.
C.
Material Contracts
In the past three fiscal years, we have not entered into any material contracts other than in the ordinary course of business and other
than those described in “Item 4. Information on the Company” or elsewhere in this annual report.
D.
Exchange Controls
See “Item 4. Information on the Company—B. Business Overview—Regulatory Matters—Regulations Relating to Foreign
Currency Exchange.”
E.
Taxation
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and
there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the
Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution
brought within, the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties which are applicable to
any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect of our shares and ADSs will not be subject to taxation in the Cayman Islands and no
withholding will be required on the payment of dividends or capital to any holder of our shares or ADSs, nor will gains derived from the
disposal of our shares or ADSs be subject to Cayman Islands income or corporation tax. No stamp duty is payable in respect of the issue
of our shares or on an instrument of transfer in respect of our shares.
Pursuant to Section 6 of the Tax Concessions Act (As Revised) of the Cayman Islands, we have obtained an undertaking from the
Financial Secretary of the Cayman Islands:
(1) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations
shall apply to us or our operations; and
(2) in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or
inheritance tax shall be payable:
(i)
on or in respect of the shares, debentures or other obligations of our company; or
(ii) by way of the withholding in whole or in part of any relevant payment as defined in the Tax Concessions Act (As Revised).
The undertaking is for a period of twenty years from November 3, 2017.

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People’s Republic of China Taxation
Income Tax and Withholding Tax
In March 2007, the National People’s Congress of China enacted the PRC Enterprise Income Tax Law, or the EIT Law, which
became effective on January 1, 2008 and was amended on December 29, 2018.
The EIT Law applies a uniform 25% enterprise income tax rate to PRC resident enterprises, including both foreign-invested
enterprises and domestic enterprises. The EIT Law imposes an enterprise income tax of 10% on dividends distributed by a foreign-
invested enterprise to its immediate holding company outside of China, if such immediate holding company is considered a “nonresident
enterprise” without any establishment or place within China or if the received dividends have no connection with the establishment or
place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a
tax treaty with China that provides for a different withholding tax rate. The Cayman Islands, where we are incorporated, does not have
such a tax treaty with China. Thus, dividends paid to us by our subsidiaries in China may be subject to the 10% withholding tax if we are
considered a “non-resident enterprise” under the EIT Law.
The EIT Law provides that enterprises established outside of China whose “de facto management bodies” are located in China are
considered “resident enterprises.” The “de facto management body” is defined as the organizational body that effectively exercises
overall management and control over production and business operations, personnel, finance and accounting, and properties of the
enterprise. Currently, there are no detailed rules or precedents governing the procedures and specific criteria for determining “de facto
management body”. STA issued the Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as
PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or Circular 82, on April 22, 2009. According to STA
Circular 82, a Chinese-controlled offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a “de facto
management body” in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following
criteria are met: (a) the primary location of the day-to-day operational management is in China; (b) decisions relating to the enterprise’s
financial and human resource matters are made or are subject to approval by organizations or personnel in China; (c) the enterprise’s
primary assets, accounting books and records, company seals, and board and shareholders meeting minutes are located or maintained in
China; and (d) 50% or more of voting board members or senior executives habitually reside in China. In addition, the STA issued the
Administrative Measures on Income Taxes of Chinese-controlled Offshore Incorporated Resident Enterprises (Trial Implementation), or
Tax Trial Measures, on July 27, 2011, and effective on September 1, 2011 and amended in 2015, providing more guidance on the
implementation of Circular 82. Both Circular 82 and the Tax Trial Measures apply only to offshore enterprises controlled by PRC
enterprises or PRC enterprise groups and are not applicable to our case. But determining criteria set forth in Circular 82 and the Tax Trial
Measures may reflect the STA’s general position on how the “de facto management body” test should be applied in determining the tax
resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises or PRC enterprise groups or by PRC
or foreign individuals. As such, it is still unclear if the PRC tax authorities would determine that, notwithstanding our status as the
Cayman Islands holding company of our operating business in China, we should be classified as a PRC “resident enterprise.”
While we do not currently consider our company or any of our overseas subsidiaries to be a China resident enterprise, there is a risk
that the PRC tax authorities may deem our company as a PRC resident enterprise since a substantial majority of the members of our
management team are located in China, in which case we would be subject to the PRC enterprise income tax at the rate of 25% on
worldwide income. If the PRC tax authorities determine that we are a resident enterprise, non-PRC shareholders and ADS holders may
be subject to PRC withholding tax upon dividends payable by us and gains on the sale of ordinary shares or ADSs may be subject to a
PRC income tax. Any such PRC tax would generally be imposed at a rate of 10% in the case of a non-PRC enterprise holder and at a rate
of 20% in the case of a non-PRC individual holder unless such holder is eligible for the benefits of a tax treaty that provides for a
reduced rate. It is unclear whether, if we are considered a PRC resident enterprise, holders of our shares or ADSs would be able to claim
the benefit of income tax treaties or agreements entered into between China and other countries or areas.
Under the EIT Law, enterprises qualified as “High New Technology Enterprises,” or HNTEs, enjoy a preferential income tax rate of
15%, rather than the uniform income tax rate of 25% which otherwise would apply. Shanghai Evergreen Technology Co., Ltd. has
qualified as an HNTE for the period of 2017 until now under the EIT Law, and has been subject to the preferential income tax rate of
15% during such period.

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On October 17, 2017, the STA issued a Public Notice of the State Administration of Taxation on Matters Concerning Withholding of
Income Tax of Non-resident Enterprises at Source, or STA Public Notice 37. This STA Public Notice 37 has entered into force as of
December 1, 2017, according to which, STA Circular 698 has been abolished from December 1, 2017.
Under the STA Public Notice 37 and other applicable PRC laws, the withholding agent (for example, payers of PRC-sourced income
to non-PRC residents) is obligated to withhold PRC income taxes from the payment. The withholding agent shall, within seven days of
the day on which the withholding obligation occurs, declare and remit the withholding tax to the competent tax authority at its locality.
The withholding agent shall establish account books for all tax it has withheld and remitted on a commission basis and archive relevant
contractual documents, so as to record the exact information about the enterprise income withheld and remitted for the non-resident
enterprise.
Although the withholding agents have the obligation to withhold relevant PRC taxes, in the event of a failure to withhold, the non-
PRC residents are still required to pay such taxes on their own. Failure to comply with the tax payment obligations by the non-PRC
residents will result in penalties, including full payment of taxes owed, fines and default interest on those taxes.
The STA issued the Announcement of State Taxation Administration on Promulgation of the Administrative Measures on Non-
resident Taxpayers Enjoying Treaty Benefits (“STA Circular 35”) on October 14, 2019, which became effective on January 1, 2020. The
STA Circular 35 further simplified the procedures for enjoying treaty benefits. According to the STA Circular 35, no approvals from the
tax authorities are required for a non-resident taxpayer to enjoy treaty benefits, and where a non-resident taxpayer self-assesses and
concludes that it satisfies the criteria for claiming treaty benefits, it may enjoy treaty benefits at the time of tax declaration or at the time
of withholding through the withholding agent, but it shall gather and retain the relevant materials as required for future inspection, and
accept follow-up administration by the tax authorities. There are also other conditions for enjoying the reduced withholding tax rate
according to other relevant tax rules and regulations. According to the Circular on Several Issues regarding the “Beneficial Owner” in
Tax Treaties, or Circular 9, which was issued on February 3, 2018 by the STA, effective as of April 1, 2018, when determining the
applicant’s status of the “beneficial owner” regarding tax treatments in connection with dividends, interest or royalties in the tax treaties,
several factors, including without limitation, whether the applicant is obligated to pay more than 50% of its income in twelve months to
residents in a third country or region, whether the business operated by the applicant constitutes the actual business activities, and
whether the counterparty country or region to the tax treaties does not levy any tax or grants tax exemption on relevant income or levies
tax at an extremely low rate, will be taken into account, and they will be analyzed according to the actual circumstances of the specific
cases. This circular further provides that applicants who intend to prove his or her status of the “beneficial owner” shall submit the
relevant documents to the relevant tax bureau according to the Administrative Measures for Non-Resident Enterprises to Enjoy
Treatments under Tax Treaties. Accordingly, GreenTree Hotel (Hong Kong), Limited may be able to enjoy the 5% withholding tax rate
for the dividends they receive from our PRC subsidiaries, respectively, if they satisfy the conditions prescribed under Circular 81 and
other relevant tax rules and regulations, and obtain the approvals as required. However, if the relevant tax authorities consider the
transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may
adjust the favorable withholding tax in the future.
Value-added Tax
On March 23, 2016, the Ministry of Finance of China and the State Administration of Taxation of China jointly issued the
Circular on the Nationwide Implementation of Pilot Program for the Collection of Value Added-Tax Instead of Business Tax, or Circular
36, which became effective on May 1, 2016. Subsequent to the effectiveness of Circular 36, most of our PRC subsidiaries’ business will
be subject to value-added tax, or VAT, at a rate of 6% and they would be permitted to offset input VAT by providing valid VAT invoices
received from vendors against their VAT liability.
According to Circular 36, the entities and individuals providing the services within the PRC shall be subject to VAT. The
services are treated as being provided within the PRC where either the service provider or the service recipient is located in the PRC. The
services subject to VAT include the provision of financial services such as transferring financial instruments. Based on the definition of
“financial instruments” under Circular 36, the ADSs and/or shares are likely to be treated as financial instruments. As such, where a
holder of the ADSs and/or shares who is an entity or individual located outside of the PRC re-sells the ADSs and/or shares to an entity or
individual located outside of the PRC and derives any gain, since neither the service provider nor the service recipient is located in the
PRC, theoretically Circular 36 does not apply and the buyer does not have the obligation to withhold the VAT or the local levies.
However, there is uncertainty as to the applicability of VAT if either the seller or buyer of ADSs and/or shares is located within the PRC.

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On April 4, 2018, the MOF and STA jointly promulgated the Circular of the Ministry of Finance and the STA on Adjustment of
Value-Added Tax Rates, or Circular 32. Circular 32 became effective on May 1, 2018 and shall supersede any previously existing
provisions in the case of any inconsistency. Further, On March 20, 2019, the MOF, the STA and the General Administration of Customs
jointly issued the Announcement on Policies for Deepening the VAT Reform, or Announcement 39, to further slash value-added tax
rates. According to the Announcement 39, (i) for general VAT payers’ sales activities or imports that are subject to VAT at an existing
applicable rate of 16% or 10%, the applicable VAT rate is adjusted to 13% or 9%, respectively; (ii) for the agricultural products
purchased by taxpayers to which an existing 10% deduction rate is applicable, the deduction rate is adjusted to 9%; (iii) for the
agricultural products purchased by taxpayers for production or commissioned processing, which are subject to VAT at 13%, the input
VAT will be calculated at a 10% deduction rate; (iv) for the exportation of goods or labor services that are subject to VAT at 16%, with
the applicable export refund at the same rate, the export refund rate is adjusted to 13%; and (v) for the exportation of goods or cross-
border taxable activities that are subject to VAT at 10%, with the export refund at the same rate, the export refund rate is adjusted to 9%.
The Announcement 39 came into effect on April 1, 2019 and shall prevail in case of any conflict with existing provisions.
Material U.S. Federal Income Tax Considerations
The following summary describes the material U.S. federal income tax consequences of the ownership and disposition of our ADSs
and Class A ordinary shares. This summary is only applicable to ADSs and Class A ordinary shares that are held as capital assets by a
U.S. Holder (as defined below).
As used herein, the term “U.S. Holder” means a beneficial owner of our ADSs or Class A ordinary shares that is for U.S. federal
income tax purposes:
●
an individual who is a citizen or resident of the United States;
●
a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the
laws of the United States, any state thereof or the District of Columbia;
●
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
●
a trust if it (i) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the
authority to control all substantial decisions of the trust or (ii) has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a U.S. person.
The discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, and regulations,
rulings and judicial decisions thereunder as of the date hereof, as well as the current income tax treaty between the United States and the
PRC, or the Treaty. Such authorities may be replaced, revoked or modified, perhaps retroactively, so as to result in U.S. federal income
tax consequences different from those discussed below. In addition, this summary assumes that the deposit agreement, and all other
related agreements, will be performed in accordance with their terms.
This summary does not represent a detailed description of the U.S. federal income tax consequences applicable to you if you are
subject to special treatment under the U.S. federal income tax laws, including if you are:
●
a dealer in securities or currencies;
●
a financial institution;
●
a regulated investment company;
●
a real estate investment trust;
●
an insurance company;

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●
a tax-exempt organization;
●
a person holding our ADSs or Class A ordinary shares as part of a hedging, integrated or conversion transaction, a constructive
sale or a straddle;
●
a person required to accelerate the recognition of any item of gross income with respect to our ADSs or Class A ordinary shares
as a result of such income being recognized on an applicable financial statement;
●
a trader in securities that has elected the mark-to-market method of accounting for your securities;
●
a person liable for alternative minimum tax;
●
a person who owns or is deemed to own 10% or more of our stock by vote or value;
●
a partnership or other pass-through entity for U.S. federal income tax purposes; or
●
a person whose “functional currency” is not the U.S. dollar.
If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our ADSs or
Class A ordinary shares, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding our ADSs or Class A ordinary shares, you should consult your tax advisors.
This summary does not contain a detailed description of all the U.S. federal income tax consequences to you in light of your
particular circumstances and does not address the Medicare tax on net investment income, U.S. federal estate and gift taxes or
the effects of any state, local or non-U.S. tax laws. If you are considering the purchase of our ADSs or Class A ordinary shares,
you should consult your tax advisors concerning the U.S. federal income tax consequences to you in light of your particular
situation as well as any consequences arising under other U.S. federal tax laws and the laws of any other taxing jurisdiction.
ADSs
If you hold ADSs, for U.S. federal income tax purposes, you generally will be treated as the owner of the underlying Class A
ordinary shares that are represented by such ADSs. Accordingly, deposits or withdrawals of Class A ordinary shares for ADSs will not be
subject to U.S. federal income tax.
Taxation of Dividends
Subject to the discussion under “— Passive Foreign Investment Company” below, the gross amount of any distributions (other than
certain pro rata distributions of our shares) on the ADSs or Class A ordinary shares (including any amounts withheld to reflect PRC
withholding taxes) will be taxable as dividends, to the extent paid out of our current or accumulated earnings and profits, as determined
under U.S. federal income tax principles. Such income (including withheld taxes) will be includable in your gross income as ordinary
income on the day actually or constructively received by you, in the case of the Class A ordinary shares, or by the depositary, in the case
of ADSs. Such dividends will not be eligible for the dividends received deduction generally allowed to corporations under the Code.

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Subject to applicable limitations (including a minimum holding period requirement), certain dividends received by non-corporate
U.S. Holders from a qualified foreign corporation may be treated as “qualified dividend income” that is subject to reduced rates of
taxation. A foreign corporation is generally treated as a qualified foreign corporation with respect to dividends paid by that corporation
on shares (or ADSs backed by such shares) that are readily tradable on an established securities market in the United States. U.S.
Treasury Department guidance indicates that our ADSs, which are listed on the New York Stock Exchange, are readily tradable on an
established securities market in the United States. Thus, subject to the discussion under “— Passive Foreign Investment Company”
below, we believe that dividends we pay on our ADSs will be eligible for the reduced tax rates. Since we do not expect that our Class A
ordinary shares will be listed on an established securities market in the United States, we do not believe that dividends that we pay on our
Class A ordinary shares that are not represented by ADSs currently meet the conditions required for the reduced tax rates. There also can
be no assurance that our ADSs will continue to be readily tradable on an established securities market in the United States in later years.
Consequently, there can be no assurance that dividends paid on our ADSs will continue to be eligible for the reduced tax rates. A
qualified foreign corporation also includes a foreign corporation that is eligible for the benefits of certain income tax treaties with the
United States. In the event that we are deemed to be a PRC resident enterprise under the PRC tax law (see “Item 10. Additional
Information—E. Taxation — People’s Republic of China Taxation” above), we may be eligible for the benefits of the Treaty. In that case,
dividends we pay on our Class A ordinary shares would be potentially eligible for the reduced rates of taxation regardless of whether
such shares are represented by ADSs, and whether or not our Class A ordinary shares are readily tradable on an established securities
market in the United States. You should consult your tax advisors regarding the application of these rules given your particular
circumstances.
In addition, notwithstanding the foregoing, non-corporate U.S. Holders will not be eligible for reduced rates of taxation on any
dividends received from us if we are a passive foreign investment company, or PFIC, in the taxable year in which such dividends are paid
or in the preceding taxable year (see “— Passive Foreign Investment Company” below).
In the event that we are deemed to be a PRC resident enterprise under the PRC tax law, you may be subject to PRC withholding
taxes on dividends paid to you with respect to the ADSs or Class A ordinary shares. See “Item 10. Additional Information—E. Taxation
— People’s Republic of China Taxation.” In that case, subject to certain conditions and limitations (including a minimum holding period
requirement) and the Foreign Tax Credit Regulations (as defined below), PRC withholding taxes on dividends may be treated as foreign
taxes eligible for credit against your U.S. federal income tax liability. For purposes of calculating the foreign tax credit, dividends paid on
the ADSs or Class A ordinary shares will be treated as foreign source income and will generally constitute passive category income.
However, recently issued U.S. Treasury regulations that address foreign tax credits, or the Foreign Tax Credit Regulations, impose
additional requirements for foreign taxes to be eligible for a foreign tax credit, and there can be no assurance that those requirements will
be satisfied. In addition, if you are eligible for the benefits of the Treaty, any PRC withholding taxes on dividends will not be creditable
against your U.S. federal income tax liability to the extent withheld at a rate exceeding the applicable rate under the Treaty. Alternatively,
instead of claiming a foreign tax credit, you may be able to deduct PRC withholding taxes on dividends in computing your taxable
income, subject to generally applicable limitations under U.S. law (including that a U.S. Holder is not eligible for a deduction for
otherwise creditable foreign income taxes paid or accrued in a taxable year if such U.S. Holder claims a foreign tax credit for any foreign
income taxes paid or accrued in the same taxable year). The rules governing the foreign tax credit and deductions for foreign taxes are
complex. You are urged to consult your tax advisor regarding the Foreign Tax Credit Regulations and the availability of the foreign tax
credit or a deduction under your particular circumstances.
To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits, as determined under U.S.
federal income tax principles, the distribution ordinarily would be treated, first, as a tax-free return of capital, causing a reduction in the
adjusted basis of the ADSs or Class A ordinary shares (thereby increasing the amount of gain, or decreasing the amount of loss, to be
recognized by you on a subsequent disposition of the ADSs or Class A ordinary shares), and, second, the balance in excess of adjusted
basis generally would be taxed as capital gain recognized on a sale or exchange. However, we do not expect to determine our earnings
and profits in accordance with U.S. federal income tax principles. Therefore, you should expect that distributions will generally be
reported to the Internal Revenue Service, or the IRS, and taxed to you as dividends (as discussed above), even if they might ordinarily be
treated as a tax-free return of capital or as capital gain.
Passive Foreign Investment Company
In general, we will be a PFIC for any taxable year in which:
●
at least 75% of our gross income is passive income, or

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●
at least 50% of the value (generally determined based on a quarterly average) of our assets is attributable to assets that produce
or are held for the production of passive income.
For this purpose, passive income generally includes dividends, interest, royalties and rents (other than royalties and rents derived in
the active conduct of a trade or business and not derived from a related person), as well as gains from the sale of assets (such as stock)
that produce passive income, foreign currency gains, and certain other categories of income. In addition, cash and other assets readily
convertible into cash are generally considered passive assets. If we own at least 25% (by value) of the stock of another corporation, we
will be treated, for purposes of determining whether we are a PFIC, as owning our proportionate share of the other corporation’s assets
and receiving our proportionate share of the other corporation’s income.
Based on the nature and composition of our income and assets, and the valuation of our assets, including goodwill, we do not believe
we were a PFIC for our 2022 taxable year. The determination of whether or not we are a PFIC is made annually. Accordingly, there is a
risk that we may become a PFIC in the current or any future taxable year due to changes in our asset or income composition or in the
value of our assets. In particular, the calculation of the value of our assets will be based, in part, on the quarterly market value of our
ADSs, which is subject to change and has been volatile. Any decrease in the market value of our ADSs may result in our becoming a
PFIC.
If we are a PFIC for any taxable year during which you hold our ADSs or Class A ordinary shares, and you do not make a timely
mark-to-market election, as described below, you will be subject to special tax rules with respect to any “excess distribution” received
and any gain realized from a sale or other disposition, including a pledge, of ADSs or Class A ordinary shares. Distributions received in a
taxable year that are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable
years or your holding period for the ADSs or Class A ordinary shares will be treated as excess distributions. Under these special tax
rules:
●
the excess distribution or gain will be allocated ratably over your holding period for the ADSs or Class A ordinary shares,
●
the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC,
will be treated as ordinary income, and
●
the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year for individuals or
corporations, as applicable, and the interest charge generally applicable to underpayments of tax will be imposed on the
resulting tax attributable to each such year.
Although the determination of whether we are a PFIC is made annually, if we are a PFIC for any taxable year in which you hold our
ADSs or Class A ordinary shares, you will generally be subject to the special tax rules described above for that year and for each
subsequent year in which you hold the ADSs or Class A ordinary shares (even if we do not qualify as a PFIC in any subsequent years).
However, if we cease to be a PFIC, you can avoid the continuing impact of the PFIC rules by making a special election to recognize gain
as if your ADSs or Class A ordinary shares had been sold on the last day of the last taxable year during which we were a PFIC. You are
urged to consult your tax advisor about this election.
In certain circumstances, in lieu of being subject to the special tax rules discussed above, you may make a mark-to-market election
with respect to your ADSs or Class A ordinary shares provided such ADSs or Class A ordinary shares are treated as “marketable stock.”
The ADSs or Class A ordinary shares generally will be treated as marketable stock if the ADSs or Class A ordinary shares are “regularly
traded” on a “qualified exchange or other market” (within the meaning of the applicable U.S. Treasury regulations). Under current law,
the mark-to-market election may be available to holders of ADSs because the ADSs are listed on the New York Stock Exchange, which
constitutes a qualified exchange, although there can be no assurance that the ADSs will be “regularly traded” for purposes of the mark-
to-market election. It should also be noted that only the ADSs and not the Class A ordinary shares are listed on the New York Stock
Exchange. Consequently, if you are a holder of Class A ordinary shares that are not represented by ADSs, you generally will not be
eligible to make a mark-to-market election.

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If you make an effective mark-to-market election, for each taxable year that we are a PFIC, you will include as ordinary income the
excess of the fair market value of your ADSs at the end of the year over your adjusted basis in the ADSs. You will be entitled to deduct
as an ordinary loss in each such year the excess of your adjusted basis in the ADSs over their fair market value at the end of the year, but
only to the extent of the net amount previously included in income as a result of the mark-to-market election. If you make an effective
mark-to-market election, any gain you recognize upon the sale or other disposition of your ADSs in a year that we are a PFIC will be
treated as ordinary income and any loss will be treated as ordinary loss, but such loss will only be treated as ordinary loss to the extent of
the net amount previously included in income as a result of the mark-to-market election.
Your adjusted basis in the ADSs will be increased by the amount of any income inclusion and decreased by the amount of any
deductions under the mark-to-market rules. If you make a mark-to-market election, it will be effective for the taxable year for which the
election is made and all subsequent taxable years unless the ADSs are no longer regularly traded on a qualified exchange or other market,
or the IRS consents to the revocation of the election. You are urged to consult your tax advisor about the availability of the mark-to-
market election, and whether making the election would be advisable in your particular circumstances.
A different election, known as the “qualified electing fund” or “QEF” election, is generally available to holders of PFIC stock, but
requires that the corporation provide the holders with a “PFIC Annual Information Statement” containing certain information necessary
for the election, including the holder’s pro rata share of the corporation’s earnings and profits and net capital gain for each taxable year,
computed according to U.S. federal income tax principles. We do not intend, however, to determine our earnings and profits or net capital
gain under U.S. federal income tax principles, nor do we intend to provide U.S. Holders with a PFIC Annual Information Statement.
Therefore, you should not expect to be eligible to make this election.
If we are a PFIC for any taxable year during which you hold our ADSs or Class A ordinary shares and any of our non-U.S.
subsidiaries is also a PFIC, you will be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for
purposes of the application of these rules. However, you will not be able to make the mark-to-market election described above in respect
of any lower-tier PFIC. You are urged to consult your tax advisors about the application of the PFIC rules to any of our subsidiaries.
You will generally be required to file IRS Form 8621 if you hold our ADSs or Class A ordinary shares in any year in which we are
classified as a PFIC. You are urged to consult your tax advisors concerning the U.S. federal income tax consequences of holding ADSs or
Class A ordinary shares if we are considered a PFIC in any taxable year.
Taxation of Capital Gains
For U.S. federal income tax purposes, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of
ADSs or Class A ordinary shares in an amount equal to the difference between the amount realized for the ADSs or Class A ordinary
shares and your adjusted basis in the ADSs or Class A ordinary shares, both determined in U.S. dollars. Subject to the discussion under
“—Passive Foreign Investment Company” above, such gain or loss will generally be capital gain or loss and will generally be long-term
capital gain or loss if you have held the ADSs or Class A ordinary shares for more than one year. Long-term capital gains of non-
corporate U.S. Holders (including individuals) are eligible for reduced rates of taxation. The deductibility of capital losses is subject to
limitations. Any gain or loss recognized by you will generally be treated as U.S. source gain or loss. However, if we are treated as a PRC
resident enterprise for PRC tax purposes and PRC tax is imposed on any gain, and if you are eligible for the benefits of the Treaty, you
may elect to treat such gain as PRC source gain under the Treaty. If you are not eligible for the benefits of the Treaty or you fail to make
the election to treat any gain as PRC source, then you generally would not be able to use a foreign tax credit for any PRC tax imposed on
the disposition of our ADSs or Class A ordinary shares unless such credit can be applied (subject to applicable limitations) against U.S.
federal income tax due on other income derived from foreign sources in the same income category (generally, the passive category).
However, pursuant to the Foreign Tax Credit Regulations, if you do not elect to treat any gain as PRC source gain under the Treaty, any
PRC tax imposed on such gain would generally not be a foreign income tax eligible for a foreign tax credit (regardless of any other
income that you may have that is derived from foreign sources). In such case, however, the non-creditable PRC tax may reduce the
amount realized on the disposition of our ADSs or Class A ordinary shares. You are urged to consult your tax advisors regarding the tax
consequences if any PRC tax is imposed on gain on a disposition of our ADSs or Class A ordinary shares, including the availability of
the foreign tax credit and the election to treat any gain as PRC source, under your particular circumstances.

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Information Reporting and Backup Withholding
In general, information reporting will apply to dividends in respect of our ADSs or Class A ordinary shares and the proceeds from
the sale, exchange or other disposition of our ADSs or Class A ordinary shares that are paid to you within the United States (and in
certain cases, outside the United States), unless you establish that you are an exempt recipient such as a corporation. A backup
withholding tax may apply to such payments if you fail to provide a taxpayer identification number and a certification that you are not
subject to backup withholding or if you fail to report in full dividend and interest income.
Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against your U.S. federal income tax liability provided the required information is furnished to the IRS in a timely
manner.
F.
Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We have filed this annual report on Form 20-F, including exhibits, with the SEC. As allowed by the SEC, in Item 19 of this annual
report, we incorporate by reference certain information we filed with the SEC. This means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be
part of this annual report.
You may read and copy this annual report, including the exhibits incorporated by reference in this annual report, at the SEC’s Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and at the SEC’s regional offices in New York, New York, and
Chicago, Illinois. You can also request copies of this annual report, including the exhibits incorporated by reference in this annual report,
upon payment of a duplicating fee, by writing to the SEC’s Public Reference Room for information.
The SEC also maintains a website that contains reports, proxy statements and other information about issuers, such as us, who file
electronically with the SEC. The address of that website is http://www.sec.gov. The information on that website is not a part of this
annual report.
I.
Subsidiary Information
Not applicable.
J.
Annual Report to Security Holders
Not applicable.
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Our exposure to interest rate risk primarily relates to interest income generated by excess cash which is mostly held in interest
bearing bank deposits. As of December 31, 2022, substantially all of our cash and cash equivalents were held in major financial
institutions located in China. Interest earning instruments carry a degree of interest rate risk. We have not used derivative financial
instruments to hedge interest rate risk. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes
in market interest rates. However, our future interest income may fall short of expectations due to changes in market interest rates.
We have not been exposed to material risks due to changes in interest rates. However, our future interest income may be lower than
expected due to changes in market interest rates.

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Equity Price Risk
We are exposed to equity price risk on our common stock holdings. As of December 31, 2022, we had investments in equity
securities (excluding investments in Gingko) of RMB41.4 million (US$6.0 million), primarily common stock in Chinese companies
which are listed in the China A-Share and Hong Kong stock market. The common stock holdings are exposed to price fluctuations.
Assuming a 1.0% decrease of share prices, the market value of the common stock holdings would have decreased to RMB40.9 million.
Foreign Exchange Risk
Substantially all of our revenues and most of our expenses are denominated in RMB. Our exposure to foreign exchange risk
primarily relates to cash and cash equivalents denominated in U.S. dollars as a result of our past issuances of ordinary shares and
proceeds from our initial public offering.
We do not believe that we currently have any significant direct foreign exchange risk and have not hedged exposures denominated in
foreign currencies or any other derivative financial instruments. Although in general, our exposure to foreign exchange risks should be
limited, the value of your investment in our ADSs will be affected by the foreign exchange rate between U.S. dollars and RMB because
the value of our business is effectively denominated in RMB, while the ADSs will be traded in U.S. dollars.
The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China, or
the PBOC. The PRC government allowed the Renminbi to appreciate by more than 20% against the U.S. dollar between July 2005 and
July 2008. Between July 2008 and June 2010, the exchange rate between the Renminbi and the U.S. dollar had been stable and traded
within a narrow band. Since June 2010, the PRC government has allowed the RMB to appreciate slowly against the U.S. dollar, though
there have been periods when the Renminbi has depreciated against the U.S. dollar. In particular, on August 11, 2015, the PBOC allowed
the Renminbi to depreciate by approximately 2% against the U.S. dollar. Since then and until the end of 2016, the Renminbi has
depreciated against the U.S. dollar by approximately 10%. While the RMB appreciated approximately 6.3% and 2.3%, respectively,
against the U.S. dollar in 2020 and 2021, the RMB depreciated approximately 8.2% against the U.S. dollar in 2022. It is difficult to
predict how long the current situation may last and when and how the relationship between the Renminbi and the U.S. dollar may change
again.
To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S.
dollar would have an adverse effect on the Renminbi amount we receive from the conversion. Conversely, if we decide to convert
Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business
purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amounts available to us.
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A.
Debt Securities
Not applicable.
B.
Warrants and Rights
Not applicable.
C.
Other Securities
Not applicable.

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D.
American Depositary Shares
In March 2018, we appointed Deutsche Bank Trust Company Americas, or Deutsche Bank, as the depositary bank for our ADR
program. We entered into a deposit agreement with Deutsche Bank, as depositary, and all holders from time to time of our ADRs on
March 26, 2018.
Fees and Charges
An ADS holder will be required to pay the following service fees to the depositary bank and certain taxes and governmental charges
(in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited securities represented by
any of your ADSs):
Service
Fees
• To any person to which ADSs are issued or to any person to which a distribution is
made in respect of ADS distributions pursuant to stock dividends or other free
distributions of stock, bonus distributions, stock splits or other distributions (except
where converted to cash)
 
Up to US$0.05 per ADS issued
• Cancellation of ADSs, including the case of termination of the deposit agreement
 
Up to US$0.05 per ADS cancelled
• Distribution of cash dividends
 
Up to US$0.05 per ADS held
• Distribution of cash entitlements (other than cash dividends) and/or cash proceeds from
the sale of rights, securities and other entitlements
 
Up to US$0.05 per ADS held
• Distribution of ADSs pursuant to exercise of rights.
 
Up to US$0.05 per ADS issued
• Depositary services
 
Up to US$0.05 per ADS held per annum on the applicable
record date(s) established by the depositary bank
An ADS holder, will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes and
governmental charges (in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited
securities represented by any of your ADSs) such as:
●
Fees for the transfer and registration of ordinary shares charged by the registrar and transfer agent for the ordinary shares in the
Cayman Islands (i.e., upon deposit and withdrawal of ordinary shares).
●
Expenses incurred for converting foreign currency into U.S. dollars.
●
Expenses for cable, telex and fax transmissions and for delivery of securities.
●
Taxes and duties upon the transfer of securities, including any applicable stamp duties, any stock transfer charges or
withholding taxes (i.e., when ordinary shares are deposited or withdrawn from deposit).
●
Fees and expenses incurred in connection with the delivery or servicing of ordinary shares on deposit.
●
Fees and expenses incurred in connection with complying with exchange control regulations and other regulatory requirements
applicable to ordinary shares, deposited securities, ADSs and ADRs.
●
Any applicable fees and penalties thereon.
The depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the brokers (on
behalf of their clients) receiving the newly issued ADSs from the depositary bank and by the brokers (on behalf of their clients)
delivering the ADSs to the depositary bank for cancellation. The brokers in turn charge these fees to their clients. Depositary fees
payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the
depositary bank to the holders of record of ADSs as of the applicable ADS record date.

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The depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions
other than cash (i.e., share dividends, rights), the depositary bank charges the applicable fee to the ADS record date holders concurrent
with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or uncertificated in direct
registration), the depositary bank sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and
custodian accounts (via DTC), the depositary bank generally collects its fees through the systems provided by DTC (whose nominee is
the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and
custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the
depositary banks.
In the event of refusal to pay the depositary fees, the depositary bank may, under the terms of the deposit agreement, refuse the
requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS
holder.
Deutsche Bank Trust Company Americas, as depositary may make payments to us or reimburse us for certain costs and expenses
upon such terms and conditions as we and the depositary bank agree from time to time
Payments by Depositary
During the year ended December 31, 2022, we did not receive any payment from Deutsche Bank, the depositary bank for our ADR
program.
PART II
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None of these events occurred in any of the years ended December 31, 2020, 2021 and 2022.
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
A.
Modifications of Rights
See “Item 10. Additional Information—B. Memorandum and Articles of Association” for a description of the rights of securities
holders, which remain unchanged.
E.
Use of Proceeds
The following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File No. 333-223261)
in relation to our initial public offering, which was declared effective by the SEC on March 26, 2018. In March 2018, we completed our
initial public offering in which we issued and sold 10,200,000 ADSs, representing 10,200,000 Class A ordinary shares, resulting in net
proceeds to us of approximately US$133.5 million, which net of underwriting discounts and commissions. Morgan Stanley & Co.
International plc, Merrill Lynch, Pierce, Fenner & Smith Incorporated and UBS Securities LLC were the representatives of the
underwriters for our initial public offering.
For the period from March 26, 2018, the date that the F-1 Registration Statement was declared effective by the SEC, to December
31, 2022, we used approximately US$128.2 million of the net proceeds from our initial public offering for general corporate purposes in
line with our strategies, including (i) the organic expansion of our hotel chain and the improvement of existing hotel properties, including
conversion of existing leased-and-operated hotels to new brands, including Gem, Gya and Vx, (ii) potential acquisitions of domestic and
overseas operators that will complement our operations and accelerate our expansion plan, and (iii) working capital and other general
corporate purposes, including marketing and upgrading our IT system.

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ITEM 15.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed
in reports filed under the Exchange Act is recorded, processed, summarized and reported within the specified time periods and
accumulated and communicated to our management, including our Group Chief Executive Officer and Group Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of our Group Chief Executive Officer and Group Chief Financial Officer, has performed an
evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under
the Exchange Act) as of December 31, 2022. Based upon that evaluation, as of December 31, 2022, our management has concluded that
our disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions our
assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risks that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Internal Control over Financial Reporting
As required by Rule 13a-15(c) of the Exchange Act, our management, under the supervision and with the participation of our Group
Chief Executive Officer and Group Chief Financial Officer, conducted an evaluation of our internal control over financial reporting as of
December 31, 2021 based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation, our management concluded that that, as of December 31, 2021,
our internal control over financial reporting was not effective due to the material weakness in controls over the completeness of the bad
debt provision for franchisee loans receivable.
To remediate our identified material weakness and improve our internal control over financial reporting, we have implemented a
number of measures to address the material weakness. These measures include the following:
(i) We have enhanced the management function to oversee the collection of franchisee loans receivable;
(ii) We have implemented additional review and monitoring controls in the calculation of the bad debt provision of our franchisee
loans receivable;
(iii) We have formalized the processes and controls over past-due franchisee loan payments.
During the fiscal year ended December 31, 2022, management completed the design, implementation and testing of the newly
designed and enhanced controls and determined that, as of December 31, 2022, these controls were appropriately designed and operating
effectively to conclude the material weaknesses have been remediated.

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Attestation Report of the Registered Public Accounting Firm
As a company with less than US$1.07 billion in revenue for our last fiscal year, we qualify as an “emerging growth company”
pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that
are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement
under Section 404 of the Sarbanes-Oxley Act of 2002, in the assessment of the emerging growth company’s internal control over
financial reporting.
Changes in Internal Control over Financial Reporting
There were no significant changes in our internal control over financial reporting during the period covered by this annual report on
Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
Our Board of Directors has determined that Dong Li, who is an independent director, qualifies as an audit committee financial expert
as defined in Item 16A of the instruction to Form 20-F.
ITEM 16B.
CODE OF ETHICS
We have adopted a code of ethics, which is applicable to all of our directors, executive officers and employees, including our Chief
Executive Officer and Chief Financial Officer. No changes have been made to the code of business conduct and ethics since its adoption
and no waivers have been granted therefrom to our directors or employees. We have filed our code of business conduct as an exhibit to
our F-1 registration statement (File No. 333-223261), as amended, initially filed with the Securities and Exchange Commission on
February 27, 2018, and a copy is available to any shareholder upon request. This code of business conduct and ethics is also available on
our website at http://ir.998.com.
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Ernst & Young Hua Ming LLP has served as our independent registered public accounting firm for each of the fiscal years in the
three-year period ended December 31, 2022, for which audited financial statements appear in this annual report.
The following table sets forth the aggregate fees by categories specified below in connection with certain professional services
rendered by Ernst & Young Hua Ming LLP, for the years indicated.
    
For the Years Ended December 31, 
2020
    
2021
    
2022
(In thousands of US dollars)
Audit Fees
 
 785  
 1,190  
 979
All Other Fees
 
 79  
 —  
 —
Total
 
 864  
 1,190  
 979
Pre-Approval Policies and Procedures
Our audit committee is responsible for the oversight of our independent accountants’ work. The policy of our audit committee is to
pre-approve all audit and non-audit services provided by Ernst & Young Hua Ming LLP, including audit services, audit-related services,
tax services and other services, as described above.
All audit and non-audit services performed by Ernst & Young Hua Ming LLP must be pre-approved by the Audit Committee.
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
None.

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ITEM 16E.
PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
ITEM 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G.
CORPORATE GOVERNANCE
We are a “foreign private issuer” (as such term is defined in Rule 3b-4 under the Exchange Act), and our ADSs, each representing
eight ordinary shares, are listed on the New York Stock Exchange. Under Section 303A of the New York Stock Exchange Listed
Company Manual, New York Stock Exchange listed companies that are foreign private issuers are permitted to follow home country
practice in lieu of the corporate governance provisions specified by the New York Stock Exchange with limited exceptions. The
following summarizes some significant ways in which our corporate governance practices differ from those followed by domestic
companies under the listing standards of the New York Stock Exchange.
●
In respect of independent directors on our Board of Directors: Only three of our five directors are independent directors: As our
home country practice does not require a majority of our Board of Directors to be independent, three of our five directors are
independent.
●
In respect of the oversight of our executive officer compensation and director nominations matters: As our home country
practice does not require independent director oversight of executive officer compensation and director nomination matters, our
compensation and nominating and corporate governance committees are not comprised solely of independent directors.
ITEM 16H.
MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
(a) Please see the Certification by the Chief Executive Officer Pursuant to Item 16I(a) of Form 20-F, which has been furnished
as Exhibit 15.2 to this annual report.
(b) For the fiscal year ended December 31, 2021, Ernst & Young Hua Ming LLP, which was a registered public accounting firm
that the PCAOB determined in December 2021 that it was unable to inspect or investigate completely because of the positions taken by
the PRC authorities, issued an audit report for us, and such audit report was included in our annual report on Form 20-F for the fiscal
year ended December 31, 2021. On June 14, 2022, we were conclusively identified by the SEC as an SEC-identified issuer pursuant to
Section 104(i)(2)(A) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7214(i)(2)(A)). The PCAOB vacated its 2021 determinations in
December 2022, and as a result, Ernst & Young Hua Ming LLP, which issued an audit report included in this annual report, is no longer a
registered public accounting firm that the PCAOB determines it is unable to inspect or investigate completely because of the positions
taken by an authority in any foreign jurisdiction.
Our company is incorporated in the Cayman Islands. Our company does not use a variable-interest entity or any similar
structure that results in additional foreign entities being consolidated in our financial statements.
To the best of our knowledge, no governmental entity in the PRC or the Cayman Islands owns any shares of our company.
To the best of our knowledge, no governmental entity in the PRC (i.e. the applicable foreign jurisdiction with respect to Ernst &
Young Hua Ming LLP) has a controlling financial interest with respect to our company.
No member of the board of directors of our company is any official of the Chinese Communist Party.
The memorandum and articles of association of our company does not contain any charter of the Chinese Communist Party.

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ITEM 16J.
INSIDER TRADING POLICIES
Not applicable.
PART III
ITEM 17.
FINANCIAL STATEMENTS
The Registrant has elected to provide the financial statements and related information specified in Item 18.
ITEM 18.
FINANCIAL STATEMENTS
The consolidated financial statements of GreenTree Hospitality Group Ltd. are included at the end of this annual report.
ITEM 19.
EXHIBIT INDEX
Exhibit

Number
   
Description of Exhibits
1.1
Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated by reference to Exhibit
3.1 to our Registration Statement on Form F-1 (File No. 333-223261), initially filed with the Securities and Exchange
Commission on February 27, 2018).
2.1
Registrant’s Form of American Depositary Receipt evidencing American Depositary Shares (incorporated by reference to
Exhibit (a) to our Registration Statement on Form F-6 (File No. 333-223659), initially filed with the Securities and
Exchange Commission on March 14, 2018 with respect to American depositary shares representing our Class A ordinary
shares).
2.2
Registrant’s Specimen of Ordinary Share Certificate (incorporated by reference Exhibit 4.1 to our Registration Statement
on Form F-1 (File No. 333-223261), initially filed with the Securities and Exchange Commission on February 27, 2018).
2.3
Form of Deposit Agreement between the Registrant and Deutsche Bank Trust Company Americas, as depositary
(incorporated by reference to Exhibit (a) to our Registration Statement on Form F-6 (File No. 333-223659), initially filed
with the Securities and Exchange Commission on March 14, 2018 with respect to American depositary shares
representing our Class A ordinary shares).
*2.4
Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934
4.1
Form of Indemnification Agreement between the Registrant and its directors and executive officers (incorporated by
reference to Exhibit 10.1 to our Registration Statement on Form F-1 (File No. 333-223261), initially filed with the
Securities and Exchange Commission on February 27, 2018).
4.2
Investment Agreement concerning Yibon Hotel Group Co., Ltd., among Yibon Hotel Group Co., Ltd., Shanghai Beifu
Industrial Co., Ltd., KIP Growth Capital Fund No. 17, Korea Investment Global Frontier Fund No. 20, Rushi Co., Ltd.
and the original shareholder of Yibon Group, dated April 5, 2017 (English Translation) (incorporated by reference to
Exhibit 10.2 to our Registration Statement on Form F-1 (File No. 333-223261), initially filed with the Securities and
Exchange Commission on February 27, 2018).
4.3
Sale and Purchase Agreement dated May 16, 2022 by and among Beifu Fortune Industrial Co., Ltd., GreenTree Inns
Hotel Management Group, Inc. and the Registrant (incorporated by reference to Exhibit 99.2 to our Current Report on
Form 6-K (File No. 001-38425), initially filed with the Securities and Exchange Commission on May 17, 2022).

Table of Contents
130
4.4
Letter Agreement dated May 16, 2022 by and among Beifu Fortune Industrial Co., Ltd., GreenTree Inns Hotel
Management Group, Inc. and the Registrant (incorporated by reference to Exhibit 99.3 to our Current Report on Form 6-
K (File No. 001-38425), initially filed with the Securities and Exchange Commission on May 17, 2022).
*8.1
List of Significant Subsidiaries of the Registrant
11.1
Code of Business Conduct of the Registrant (incorporated by reference to Exhibit 99.1 to our Registration Statement on
Form F-1 (File No. 333-223261), initially filed with the Securities and Exchange Commission on February 27, 2018).
*12.1
Certification of our Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*12.2
Certification of our Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
**13.1
Certification of our Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
**13.2
Certification of our Principal Financial Officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
*15.1
Consent of Zhonglun W&D Law Firm
**15.2
Certification by the Chief Executive Officer Pursuant to Item 16I(a) of Form 20-F
*101.INS
Inline XBRL Instance Document.
*101.SCH
Inline XBRL Taxonomy Extension Schema Document.
*101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
*101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
*101.LAB
Inline XBRL Taxonomy Extension Labels Linkbase Document.
*101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document. Cover Page Interactive Data
*104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
*
Filed herewith
**
Furnished herewith

Table of Contents
131
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.
 
GREENTREE HOSPITALITY GROUP LTD.
 
 
 
By: /s/ Alex S. Xu
 
 
Name:
Alex S. Xu
 
 
Title:
Chairman and Chief Executive Officer
Date: April 28, 2023

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020, 2021 and 2022

Table of Contents
F-1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID:1408)
F-2
Consolidated Balance Sheets as of December 31, 2021 and 2022
F-3
Consolidated Statements of Comprehensive Income/(Loss) for the Years Ended December 31, 2020, 2021 and 2022
F-5
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2020, 2021 and 2022
F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2021 and 2022
F-7
Notes to the Consolidated Financial Statements
F-9

Table of Contents
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of GreenTree Hospitality Group Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of GreenTree Hospitality Group Ltd. (the “Company”) as of December
31, 2022 and 2021, the related consolidated statements of comprehensive income/(loss), shareholders’ equity and cash flows for each of
the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
Adoption of New Accounting Standard
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases using a
modified retrospective transition method in the year ended December 31, 2022.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our
audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
/s/ Ernst & Young Hua Ming LLP
We have served as the Company’s auditor since 2012.
Shanghai, the People’s Republic of China
April 28, 2023

Table of Contents
F-3
GREENTREE HOSPITALITY GROUP LTD.
CONSOLIDATED BALANCE SHEETS
    
As of December 31, 
    
2021
    
2022
    
2022
Notes
    
RMB
    
RMB
    
USD
ASSETS
 
 
   
   
  
Current assets:
 
   
   
   
  
Cash and cash equivalents
 
 
298,428,709
637,150,219
92,378,098
Restricted cash
3,300,000
7,937,397
1,150,814
Short-term investments
 
11
 
557,458,675
186,031,572
26,972,043
Investments in equity securities
 
11
 
157,988,851
41,361,346
5,996,831
Accounts receivable, net of allowance for doubtful accounts of RMB3,429,201 and
RMB7,527,631 (USD1,091,404) as of December 31, 2021 and 2022 respectively
 
 
95,589,936
115,505,310
16,746,696
Amounts due from related parties
 
22
 
310,419,860
437,165,271
63,383,006
Prepaid rent
 
 
15,454,967
—
—
Inventories
 
 
2,297,584
2,236,082
324,201
Other current assets
 
12
 
142,737,163
92,851,350
13,462,181
Loans receivable, net
 
6
 
247,530,580
181,667,170
26,339,264
Total current assets
 
 
1,831,206,325
1,701,905,717
246,753,134
Amounts due from a related party
22
—
112,360,000
16,290,669
Restricted cash
 
 
18,869,900
25,359,592
3,676,795
Long-term time deposits
 
 
160,000,000
130,000,000
18,848,228
Loans receivable, net
 
6
 
290,967,680
177,172,509
25,687,599
Property and equipment, net
 
7
 
1,045,356,265
834,771,681
121,030,517
Intangible assets, net
 
8
 
520,117,479
38,111,936
5,525,711
Operating lease right-of-use assets
9
—
1,544,739,494
223,966,174
Goodwill
 
10
 
120,819,948
29,583,468
4,289,200
Long-term investments
 
11
 
188,790,785
175,554,460
25,453,004
Other assets
 
12
 
329,366,340
94,606,582
13,716,665
Deferred tax assets
 
19
 
161,565,839
231,913,646
33,624,318
TOTAL ASSETS
 
 
4,667,060,561
5,096,079,085
738,862,014
LIABILITIES AND EQUITY
 
 
Current liabilities:
 
 
Short-term bank loans
 
13
 
356,000,000
99,800,000
14,469,640
Long-term bank loans, current portion
13
50,200,000
141,800,000
20,559,067
Accounts payable
 
 
24,036,544
20,745,204
3,007,772
Advance from customers
 
5
 
39,773,738
18,681,010
2,708,492
Amounts due to related parties
 
22
 
9,530,627
13,812,954
2,002,690
Salary and welfare payable
 
 
60,154,565
68,684,825
9,958,364
Deferred rent
 
 
1,926,957
—
—
Deferred revenue
 
5
 
215,147,975
189,105,747
27,417,756
Operating lease liabilities, current
9
—
210,388,801
30,503,509
Accrued expenses and other current liabilities
 
14
 
381,282,062
400,054,308
58,002,422
Income tax payable
 
 
70,897,366
71,788,163
10,408,305
Dividends payable
40,999,458
—
—
Total current liabilities
 
 
1,249,949,292
1,234,861,012
179,038,017
Deferred rent
 
 
68,842,692
—
—
Operating lease liabilities, non-current
9
—
1,449,422,906
210,146,568
Deferred revenue
 
5
 
314,472,488
232,695,351
33,737,655
Long-term bank loans, non current portion
13
301,800,000
160,000,000
23,197,819
Other long-term liabilities
 
15
 
132,046,925
120,196,036
17,426,787
Deferred tax liabilities
 
19
 
228,201,745
60,456,710
8,765,399
Unrecognized tax benefits
 
19
 
328,820,281
349,559,101
50,681,305
Total liabilities
 
 
2,624,133,423
3,607,191,116
522,993,550
The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents
F-4
GREENTREE HOSPITALITY GROUP LTD.
CONSOLIDATED BALANCE SHEETS — (Continued)
    
    
As of December 31, 
    
2021
    
2022
    
2022
Notes
RMB
RMB
USD
Commitments and contingencies
 
23
 
 
 
  
Shareholders’ equity:
  
  
  
Class A ordinary shares (USD0.50 par value per share; 400,000,000 and
400,000,000 shares authorized as of December 31, 2021 and 2022;
68,286,954 and 68,201,056 shares issued and outstanding as of
December 31, 2021 and 2022 respectively)
 
16  
222,587,070
222,587,070
32,272,092
Class B ordinary shares (USD0.50 par value per share; 100,000,000 and
100,000,000 shares authorized as of December 31, 2021 and 2022;
34,762,909 and 34,762,909 shares issued and outstanding as of
December 31, 2021 and 2022, respectively)
 
16  
115,534,210
115,534,210
16,750,886
Treasury Stock
24
—
(16,971,057)
(2,460,572)
Additional paid-in capital
 
1,151,384,306
1,151,321,950
166,925,992
Retained earnings(accumulated losses)
 
326,298,618
(55,918,341)
(8,107,397)
Accumulated other comprehensive income
 
41,880,907
27,732,104
4,020,776
Total GreenTree Hospitality Group Ltd. shareholders’ equity
 
1,857,685,111
1,444,285,936
209,401,777
Noncontrolling interests
 
185,242,027
44,602,033
6,466,687
Total shareholders’ equity
 
2,042,927,138
1,488,887,969
215,868,464
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
4,667,060,561
5,096,079,085
738,862,014
The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents
F-5
GREENTREE HOSPITALITY GROUP LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
    
Year Ended December 31, 
    
2020
    
2021
    
2022
    
2022
Notes
RMB
RMB
RMB
USD
Revenues:
 
  
   
  
  
Leased-and-operated hotels (including revenue from related parties of
RMB320,179, RMB288,392 and RMB47,704 (USD6,916) for the years ended
December 31, 2020, 2021 and 2022, respectively)
 
5
227,074,041
391,960,031
338,506,220
49,078,788
Franchised-and-managed hotels (including revenue from related parties of
RMB852,287, RMB1,251,888 and RMB1,285,068 (USD186,317) for the years
ended December 31, 2020, 2021 and 2022, respectively)
 
5
677,480,818
774,359,348
582,441,077
84,446,018
Others
 
5
25,455,237
39,826,579
15,853,985
2,298,612
Total revenues
 
930,010,096
1,206,145,958
936,801,282
135,823,418
Operating costs and expenses:
 
Hotel operating costs (including purchase from related parties of RMB764,045,
RMB889,140 and RMB20,754 (USD3,009) for the years ended
December 31, 2020, 2021 and 2022, respectively)
 
17
(401,659,306)
(651,376,905)
(594,019,322)
(86,124,706)
Selling and marketing expenses (including service from a related party of
RMB6,021,433, RMB9,438,030 and RMB6,167,777 (USD894,243) for the years
ended December 31, 2020, 2021 and 2022, respectively)
 
(75,347,166)
(66,921,718)
(38,534,427)
(5,586,967)
General and administrative expenses
 
(160,420,554)
(256,160,262)
(210,759,610)
(30,557,271)
Other operating expenses
 
(1,731,405)
(4,937,625)
(3,244,855)
(470,460)
Impairment loss of goodwill
(91,236,480)
(13,228,046)
Other general expenses
(3,000,000)
(99,886,003)
(461,597,460)
(66,925,340)
Total operating costs and expenses
 
(642,158,431)
(1,079,282,513)
(1,399,392,154)
(202,892,790)
Other operating income
 
31,399,552
27,059,935
19,448,889
2,819,824
Income (Loss) from operations
 
319,251,217
153,923,380
(443,141,983)
(64,249,548)
Interest income (including interest income from related parties of RMB21,336,855,
RMB544,352 and RMB12,333 (USD1,788) for the years ended
December 31, 2020, 2021 and 2022, respectively)
 
72,934,212
59,974,418
47,383,941
6,870,026
Interest expenses
 
(3,456,316)
(12,671,385)
(25,375,848)
(3,679,152)
(Losses and impairment) Gains on equity securities held
 
(36,773,521)
9,137,875
(62,156,235)
(9,011,807)
Other income, net
 
2,296,981
11,818,559
24,229,536
3,512,952
Income/(Loss) before income taxes and share of losses in equity method investments  
354,252,573
222,182,847
(459,060,589)
(66,557,529)
Income tax (expense)/benefits
 
19
(110,459,202)
(108,888,882)
45,592,418
6,610,279
Income before share of losses in equity method investments
 
243,793,371
113,293,965
(413,468,171)
(59,947,250)
Share of income/(loss) in equity method investments, net of tax
 
909,365
382,874
(1,598,301)
(231,732)
Net income/(loss)
 
244,702,736
113,676,839
(415,066,472)
(60,178,982)
Net loss attributable to noncontrolling interests
 
16,641,655
3,761,411
32,849,513
4,762,732
Net income/(loss) attributable to ordinary shareholders
 
261,344,391
117,438,250
(382,216,959)
(55,416,250)
Earnings/(Loss) per share
 
Class A ordinary shares-basic and diluted
 
24
2.54
1.14
(3.71)
(0.54)
Class B ordinary shares-basic and diluted
 
24
2.54
1.14
(3.71)
(0.54)
Weighted average shares outstanding
 
Class A ordinary shares-basic and diluted
 
24
68,286,954
68,286,954
68,201,056
68,201,056
Class B ordinary shares-basic and diluted
 
24
34,762,909
34,762,909
34,762,909
34,762,909
Other comprehensive loss
 
25
-Foreign currency translation adjustments, net of tax of nil
 
(19,714,207)
(6,497,403)
(11,361,872)
(1,647,317)
-Unrealized gains(loss) on available-for-sale investments, net of tax
—
2,791,663
(2,786,931)
(404,067)
Other comprehensive loss, net of tax
 
(19,714,207)
(3,705,740)
(14,148,803)
(2,051,384)
Comprehensive income/(loss), net of tax
 
224,988,529
109,971,099
(429,215,275)
(62,230,365)
Comprehensive loss attributable to noncontrolling interests
 
16,641,655
3,761,411
32,849,513
4,762,731
Comprehensive income/(loss) attributable to ordinary shareholders
 
241,630,184
113,732,510
(396,365,762)
(57,467,634)
The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents
F-6
GREENTREE HOSPITALITY GROUP LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In Renminbi, except share data, unless otherwise stated)
Total Green
    Accumulated
Tree Hospitality
   
Class A
   
Class A
Class B
   
Additional    
Retained
Other
Group Ltd.
Ordinary Shares
Treasury stock
Ordinary Shares
Paid-in
Earnings
Comprehensive
Shareholders’     Noncontrolling   
    
Shares
    
Amount
     Shares     
Amount
    
Shares
    
Amount
    
Capital
    (accumulated losses)    
Income
    
Equity
    
interests
     Total Equity
Balance at January 1,
2020
67,416,046
219,526,699
—
—
34,762,909
115,534,210
1,152,108,217
308,698,533
65,300,854
1,861,168,513
156,591,494
2,017,760,007
Issuance of Class A
ordinary shares as a
payment to the
acquisition of
Urban
870,908
3,060,371
—
—
—
—
(3,060,371)
—
—
—
—
—
Capital contribution
from noncontrolling
interest holders
 
—
—
—
—
—
—
—
—
—
—
6,943,589
6,943,589
Net income
 
—
—
—
—
—
—
—
261,344,391
—
261,344,391
(16,641,655)
244,702,736
Foreign currency
translation
adjustments
 
—
—
—
—
—
—
—
—
(19,714,207)
(19,714,207)
—
(19,714,207)
Share-based
compensation (Note
18)
 
—
—
—
—
—
—
232,558
—
—
232,558
—
232,558
Balance at
December 31, 2020  68,286,954
222,587,070
—
—
34,762,909
115,534,210
1,149,280,404
570,042,924
45,586,647
2,103,031,255
146,893,428
2,249,924,683
Distribution to the
shareholders
—
—
—
—
—
—
—
(361,182,556)
—
(361,182,556)
—
(361,182,556)
Capital contribution
from noncontrolling
interest holders
 
—
—
—
—
—
—
—
—
—
—
8,191,000
8,191,000
Acquisition of
noncontrolling
interest
—
—
—
—
—
—
(360,861)
—
—
(360,861)
(657,526)
(1,018,387)
Acquisitions of
subsidiaries and
business
—
—
—
—
—
—
—
—
—
—
34,576,536
34,576,536
Net income
 
—
—
—
—
—
—
—
117,438,250
—
117,438,250
(3,761,411)
113,676,839
Foreign currency
translation
adjustments
 
—
—
—
—
—
—
—
—
(6,497,403)
(6,497,403)
—
(6,497,403)
Unrealized gains on
available-for-sale
investments
—
—
—
—
—
—
—
—
2,791,663
2,791,663
—
2,791,663
Share-based
compensation (Note
18)
 
—
—
—
—
—
—
2,464,763
—
—
2,464,763
—
2,464,763
Balance at
December 31, 2021  68,286,954
222,587,070
—
—
34,762,909
115,534,210
1,151,384,306
326,298,618
41,880,907
1,857,685,111
185,242,027
2,042,927,138
Capital contribution
from noncontrolling
interest holders
—
—
—
—
—
—
—
—
—
—
400,000
400,000
Net loss
 
—
—
—
—
—
—
—
(382,216,959)
—
(382,216,959)
(32,849,513)
(415,066,472)
Share consideration for
disposal of Urban
—
—
(870,908)
(16,971,057)
—
—
—
—
—
(16,971,057)
—
(16,971,057)
Deconsolidation or
disposal of
subsidiaries
—
—
—
—
—
—
—
—
(108,190,481)
(108,190,481)
Foreign currency
translation
adjustments
 
—
—
—
—
—
—
—
—
(11,361,872)
(11,361,872)
—
(11,361,872)
Unrealized losses on
available-for-sale
investments
—
—
—
—
—
—
—
—
(2,786,931)
(2,786,931)
—
(2,786,931)
Share-based
compensation (Note
18)
 
—
—
—
—
—
—
(62,356)
—
—
(62,356)
—
(62,356)
Balance at
December 31, 2022  68,286,954
222,587,070
(870,908)
(16,971,057)
34,762,909
115,534,210
1,151,321,950
(55,918,341)
27,732,104
1,444,285,936
44,602,033
1,488,887,969
Balance at
December 31, 2022
(USD)
 
32,272,092
(2,460,572)
16,750,886
166,925,992
(8,107,397)
4,020,776
209,401,777
6,466,687
215,868,464
The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents
F-7
GREENTREE HOSPITALITY GROUP LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
    
Year Ended December 31, 
    
2020
    
2021
    
2022
    
2022
RMB
RMB
RMB
USD
Operating activities:
 
   
   
   
  
Net income(loss)
 
244,702,736
113,676,839
(415,066,472)
(60,178,982)
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
65,869,971  
98,110,657  
109,873,526  
15,930,164
Share of (gains)losses in equity method investments
 
(909,364) 
(382,874) 
1,598,301  
231,732
Impairment of goodwill
—
—
91,236,480
13,228,046
Impairment of intangible assets with indefinite life
—
—
12,000,345
1,739,886
Impairment of long-lived assets
—
—
48,306,360
7,003,764
Noncash lease expense
—
—
176,432,750
25,580,344
(Gains)losses from disposal of subsidiaries
 
(1,779,000) 
118,443  
16,117,056  
2,336,753
Interest income
 
(11,542,121) 
(3,669,643) 
(844,175) 
(122,394)
Bad debt expenses
 
29,953,404
132,591,726
428,304,998
62,098,387
Losses and impairment (Gains) on equity securities held
 
44,506,823  
(9,137,875) 
62,156,235  
9,011,807
Losses on disposal of property and equipment
—
604,017
1,303,452
188,983
Foreign exchange losses (gains)
 
4,723,948
(1,310,346)
(17,668,367)
(2,561,672)
Share-based compensation
 
232,558  
2,464,763  
(62,356) 
(9,041)
Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
 
(28,789,041)
(22,329,328)
(56,670,603)
(8,216,465)
Prepaid rent
 
5,196,798  
(1,857,100) 
—  
—
Inventories
 
(1,281,009) 
1,495,974  
(793,081) 
(114,986)
Amounts due from related parties
 
10,329,181
(3,963,547)
(4,464,609)
(647,307)
Other current assets
 
(18,807,170)
(60,345,480)
46,230,006
6,702,721
Other assets
 
(19,680,102) 
(49,214,290) 
(2,349,148) 
(340,594)
Accounts payable
 
4,546,551  
4,520,260  
574,260  
83,260
Amounts due to related parties
 
(319,778) 
6,332,374  
4,282,327  
620,879
Salary and welfare payable
 
8,913,678  
8,586,978  
10,100,358  
1,464,414
Deferred revenue
 
(59,516,154) 
(53,595,903) 
(75,948,621) 
(11,011,515)
Advance from customers
 
(5,800,119) 
5,468,230  
(16,334,755) 
(2,368,317)
Accrued expenses and other current liabilities
 
13,169,672  
71,545,537  
88,799,912  
12,874,777
Income tax payable
 
(6,354,794)
(16,586,604)
(169,894)
(24,632)
Unrecognized tax benefits
 
29,038,185
38,140,379
20,738,820
3,006,846
Operating lease liabilities
—
—
(106,975,668)
(15,510,014)
Deferred rent
 
6,997,755
40,770,544
—
—
Other long-term liabilities
 
(5,549,798)
14,648,804
(6,594,188)
(956,067)
Deferred taxes
 
(12,595,878)
44,292,605
(121,900,554)
(17,673,919)
Net cash provided by operating activities
 
295,256,932
360,975,140
292,212,695
42,366,858
Investing activities:
 
 
 
 
Purchases of property and equipment
 
(111,929,994) 
(341,715,516) 
(69,012,279) 
(10,005,840)
Purchases of intangible assets
 
(887,893) 
(201,746) 
(108,028) 
(15,663)
Proceeds from disposal of property and equipment
 
80,355  
—  
2,388,399  
346,285
Acquisitions, net of cash received
 
(18,415,807) 
(147,608,325) 
—  
—
Advances for acquisitions
 
(6,550,000) 
(39,483,494) 
—  
—
Collections of acquisition advances
 
36,352,700  
12,154,500  
—  
—
Advances for purchases of property and equipment
—
(219,346,261)
—
—
Repayments from advances for purchases of property and equipment
—
22,400,000
3,247,390
470,827
Purchases of short-term investments
 
(206,596,401)
(378,189,082)
(161,760,000)
(23,452,995)
Proceeds from maturities of short-term investments
 
453,434,366
536,383,232
517,528,048
75,034,514
Proceeds from maturities of long-term time deposits
—
50,000,000
—
—
Purchase of long-term time deposits
 
(30,000,000)
(130,000,000)
—
—
Purchases of investments in equity securities
 
(65,829,314)
(8,940,000)
—
—
Proceeds from disposal of equity securities
 
198,976
284,004,591
116,555,911
16,899,019
Proceeds from disposal of equity method investments
 
6,380,000
—
—
—
Proceeds from disposal of subsidiaries
 
2,183,350
1,693,391
79,666,586
11,550,569
Loans to related parties
 
(528,356,500)
(604,618,942)
(168,695,802)
(24,458,592)
Repayment from related parties
 
539,996,179
307,933,500
43,555,000
6,314,881
Loans to third parties
 
(62,000,000)
(36,944,271)
(14,628,629)
(2,120,952)
Repayment from third parties
 
—
55,127,367
1,638,833
237,608

Table of Contents
F-8
GREENTREE HOSPITALITY GROUP LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
    
Year Ended December 31, 
    
2020
    
2021
    
2022
    
2022
RMB
RMB
RMB
USD
Investing activities (continued):
 
   
   
   
  
Loan to franchisees
 
(218,821,974)
(423,399,028)
(47,760,740)
(6,924,656)
Repayment from franchisees
 
99,209,300
133,380,285
95,844,426
13,896,136
Others
—
(1,018,387)
—
—
Net cash used in/(generated from) investing activities
 
(111,552,657)
(928,388,186)
398,459,115
57,771,141
Financing activities:
 
 
 
 
Distribution to the shareholders (Note 1)
 
—  
(320,253,160) 
(40,999,458) 
(5,944,363)
Proceeds from bank loans
 
160,000,000  
808,000,000  
99,800,000  
14,469,640
Repayment of bank loans
 
(70,000,000) 
(250,000,000) 
(406,200,000) 
(58,893,464)
Loan from non-controlling interest
 
20,585,804  
9,689,903  
5,103,299  
739,909
Capital contribution from noncontrolling interest holders
 
6,943,589  
8,191,000  
400,000  
57,995
Payment for contingent consideration
 
(2,001,521) 
—  
—  
—
Net cash generated from/(used in) financing activities
 
115,527,872  
255,627,743  
(341,896,159) 
(49,570,283)
Effect of exchange rate changes on cash and cash equivalents and restricted cash
 
(7,664,261) 
(1,344,197) 
1,072,948  
155,563
Net increase/(decrease) in cash and cash equivalents and restricted cash
 
291,567,886  
(313,129,500) 
349,848,599  
50,723,279
Cash and cash equivalents and restricted cash at the beginning of the year
 
342,160,223  
633,728,109  
320,598,609  
46,482,428
Cash and cash equivalents and restricted cash at the end of the year
 
633,728,109  
320,598,609  
670,447,208  
97,205,707
Supplemental disclosure of cash flow information:
 
 
 
 
Interest paid
 
(4,470,953) 
(7,363,066) 
(25,579,525) 
(3,708,683)
Income taxes paid
 
(105,591,179) 
(78,296,994) 
(53,827,717) 
(7,804,285)
Supplemental disclosure of non-cash investing and financing activities:
 
   
   
   
  
Consideration payable for acquisitions
 
—  
15,342,675  
—  
—
Share consideration of disposal of Urban Group
—
—
16,971,057
2,460,572
Reconciliation of cash, cash and equivalents and restricted cash
 
Cash and cash equivalents
 
611,358,209
298,428,709
637,150,219
92,378,098
Restricted cash, current
—
3,300,000
—
—
Restricted cash, non-current
 
22,369,900
18,869,900
33,296,989
4,827,609
Total cash, cash and equivalents and restricted cash shown in the statements of cash flow
 
633,728,109
320,598,609
670,447,208
97,205,707
The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-9
1.    ORGANIZATION AND PRINCIPAL ACTIVITIES
GreenTree Hospitality Group Ltd. (the “Company”) was incorporated in the Cayman Islands on October 18, 2017. Alex S. Xu is the
founder, Chief Executive Officer (“CEO”) and controlling shareholder of the Company (through his shareholding of Class A ordinary
shares and Class B ordinary shares of Green Tree Inns Hotel Management Group. Inc. “GTI”) which account for 78.59% of the voting
interest of the Company (the “Founder”).
In preparation of its initial public offering in the United States, the Company had undergone a reorganization in 2017 whereby the
Company became the parent entity of its consolidated subsidiaries. As part of the reorganization, the business operations of the
consolidated subsidiaries were transferred to the Company. In return, the Company issued 48,635,252 Class A ordinary shares and
42,716,957 Class  B ordinary shares to GTI, a company controlled by the Founder (the “Reorganization”). Subsequent to the
Reorganization, GTI became the sole shareholder of the Company. As the Company, its subsidiaries are all under the control of the
Founder, the reorganization was accounted for as a transaction under common control in a manner similar to a pooling of interests.
Therefore, the accompanying consolidated financial statements have been prepared as if the corporate structure of the Company had been
in existence since the beginning of the periods presented.
On March 11, 2018, 7,594,048 Class B ordinary shares were redesignated as Class A ordinary shares.
On March 27, 2018, the Company completed an initial public offering (“IPO”) on the New York Stock Exchange. The Company
offered 10,200,000 ADSs representing 10,200,000 Class A ordinary shares at USD14.00 per ADS. Net proceeds from the IPO deducting
underwriting discount were USD133,518,000. IPO costs of RMB30,827,578 were recorded as reduction of the proceeds from the IPO in
shareholders’ equity.
On January 25, 2019 and June 27, 2019, the Company issued an aggregate of 626,746 Class A ordinary shares as a portion of the
purchase consideration for the acquisition of 60% equity interest mainly in Argyle Hotel Management (Beijing) Co., Ltd (“Argyle
Beijing”).
On January  15, 2020, the Company issued 870,908  Class A ordinary shares as a portion of the purchase consideration for the
acquisition of 70% equity interest in Shandong Xinghui Urban Hotel Management Group Co., Ltd (“Urban”).
On December 20, 2021, the Company announced that its board of directors approved the payment of a cash dividend of USD0.55
per ordinary share and the total amount of cash distributed for the dividend was USD56,667,425, among which USD50,243,715
(equivalent to RMB320,253,160) was paid in 2021 and the rest USD6,423,710 (equivalent to RMB40,999,458) was paid in January
2022.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-10
1.    ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)
The Company and its subsidiaries are hereinafter referred to as the Group. The principal business activities of the Group are to
develop leased-and-operated and franchised-and-managed economy hotels under the “GreenTree” brand in the PRC. The Group’s major
direct and indirect invested subsidiaries consist of the following as of December 31, 2022:
    
    
Date of 
    
    
Incorporation, 
Percentage of 
Merger or 
Place of 
Major 
Major subsidiaries
Ownership
Acquisition
Incorporation
Operation
GreenTree Inns Hotel (Shanghai) Management, Inc.
 
100 %  
November 30, 2004  
PRC  
Hotel management
GreenTree Inns Hotel (China) Management, Inc.
 
100 %  
June 30, 2005  
PRC  
Hotel management
GreenTree Inns Jiangpu Hotel (Shanghai) Company Limited.  
100 %  
August 9, 2005  
PRC  
Hotel management
Hexie (Changzhou) Hotel Management Co., Ltd.
 
100 %  
September 14, 2006  
PRC  
Hotel management
GreenTree Inns Hotel (Jiangsu) Management, Inc.
 
100 %  
January 30, 2007  
PRC  
Hotel management
GreenTree Inns Hotel (Changning) Management, Inc.
 
100 %  
January 30, 2007  
PRC  
Hotel management
GreenTree Inns Hotel (Tianjin) Co., Ltd.
 
100 %  
August 2, 2007  
PRC  
Hotel management
GreenTree Inns Hotel (Zhejiang) Management, Inc.
 
100 %  
August 13, 2007  
PRC  
Hotel management
GreenTree Inns Hotel (Beijing) Management, Inc.
 
100 %  
March 17, 2008  
PRC  
Hotel management
Shiruide Hotel Management (Shanghai) Co., Ltd.
 
100 %  
February 16, 2009  
PRC  
Hotel management
Jinan Dongrunbao Inns Management Co., Ltd.
 
100 %  
April 22, 2009  
PRC  
Hotel management
GreenTree Suites Management Corp (“GreenTree Suites”)
 
100 %  
June 30, 2009  
Cayman Islands  
Investment holding
Pacific Hotel Investment, Inc.(“PHI”)
 
100 %  
June 30, 2009  
Samoa  
Investment holding
GreenTree Inns Hotel Management Group, Inc. (“GreenTree
Samoa”)
 
100 %  
October 28, 2010  
Samoa  
Investment holding
GreenTree Hotels (Hong Kong), Limited.
 
100 %  
February 17, 2011  
Hong Kong  
Investment holding
Shanghai Evergreen Technology Co., Ltd. (“Shanghai
Evergreen”)
 
100 %  
October 20, 2011  
PRC  
Information technology services
Shanghai Beifu Industrial Co., Ltd.
 
100 %  
February 25, 2014  
PRC  
Hotel management
Shenzhen Gegao Investment Management Co., Ltd.
 
100 %  
May 7, 2015  
PRC  
Investment holding
Yancheng Ruixin Hotel Management Co., Ltd.
 
70 %  
June 5, 2015  
PRC  
Hotel management
Shanghai Jingjia Hotel Co., Ltd.
 
100 %  
February 15, 2017  
PRC  
Hotel management
Shanghai Wumian Hotel Management Co., Ltd.
 
66.7 %  
January 16, 2018  
PRC  
Hotel management
Yancheng Zexin Hotel Management Co., Ltd.
 
51 %  
July 1, 2018  
PRC  
Hotel management
Foshan Baiqinghui Hotel Management Co., Ltd.
 
70 %  
August 31, 2018  
PRC  
Hotel management
GreenTree Hotel (Xuzhou) Co., Ltd.
 
100 %  
February 5, 2018  
PRC  
Hotel property
Banyan Hotel (Xuzhou) Co., Ltd.
 
100 %  
May 3, 2018  
PRC  
Hotel property
Suzhou Ganglongkaiyuan Hotel Management Co., Ltd.
100 %
May 31, 2019
PRC
Hotel property
Shanghai Sipei Technology Co., Ltd. (“Shanghai Sipei”)
100 %
October 20, 2011
PRC
Information technology services
Since June 2022 , the Group deconsolidated Argyle Beijing and its subsidiaries due to loss of effective control (Note 4).
In November 2022, the Group deconsolidated Urban and its subsidiaries (Note 4).

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-11
1.    ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)
Leased-and-operated hotels
The Group owns hotel property or leases hotel properties from property owners and is responsible for all aspects of hotel operations
and management, including hiring, training and supervising the managers and employees required to operate the hotels. In addition, the
Group is responsible for hotel development and customization to conform to the standards of the “GreenTree” brand, as well as repairs
and maintenance, operating expenses and management of properties over the term of the lease, most initial terms of which ranges from 5
to 22 years.
Franchised-and-managed hotels
The Group enters into franchise arrangements with property owners or franchisees who lease hotel properties from property owners
for which the Group is not responsible for employee recruiting and compensation, except for the general manager of most franchised-
and-managed hotels. Under a typical franchise agreement, the franchisee is required to pay an initial franchise fee and recurring franchise
management fees equal to a certain  percentage of the revenues of the hotel. The franchisee is responsible for the costs of hotel
development and customization and the costs of its operations. The term of the franchise agreement is 5 to 20 years and is renewable
only upon a mutual agreement between the Group and the franchisee.
2.   SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements of the Group have been prepared in conformity with accounting principles generally accepted
in the United States of America (“US GAAP”).
Basis of consolidation
The accompanying consolidated financial statements include the financial statements of the Company and its subsidiaries. All
intercompany transactions and balances have been eliminated upon consolidation.
The Group evaluates its business activities and arrangements with the entities that operate the franchised-and-managed hotels to
identify potential variable interest entities. Generally, these entities qualify for the business scope exception; therefore, consolidation is
not appropriate under the variable interest entity consolidation guidance.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-12
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Use of estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amount of revenues and expenses during the reporting period. Changes in facts and circumstances may result in revised
estimates. Actual results could differ from those estimates, and as such, differences could be material to the consolidated financial
statements.
The Group bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent
from other sources. Significant accounting estimates reflected in the Group’s consolidated financial statements include allowance for
doubtful accounts receivable, impairment of loans receivable, fair value measurement and impairment of investments, the useful lives
and impairment of property and equipment and intangible assets, valuation allowance for deferred tax assets, impairment of goodwill,
average life of memberships, estimates involved in the accounting for its membership program, purchase price allocation, share-based
compensation arrangements and discount rate used to measure lease liabilities.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and demand deposits placed with commercial banks or other financial institutions
and highly liquid investments that are readily convertible to known amounts of cash and with original maturities from the date of
purchase of three months or less. All cash and cash equivalents are unrestricted as to withdrawal and use.
Restricted cash
Restricted cash comprise of deposits pledged with banks as security in relation to the guarantees for prepaid cards and borrowings
and deposits restricted due to lawsuit.
Investments
Short-term investments
Short-term investments include time deposits with maturities of less than one year and investments in wealth management products,
where certain deposits with variable interest rates or where principal amounts are not guaranteed, are placed with certain financial
institutions. The Group accounts for short-term investments in debt in accordance with ASC topic 320, Investments—Debt Securities
(“ASC 320”). The Group classifies the short-term investments in debt as “held-to-maturity”, “trading” or “available-for-sale”, whose
classification determines the respective accounting methods stipulated by ASC 320. Dividend and interest income, including
amortization of the premium and discount arising at acquisition, for all categories of investments in securities, are included in earnings.
Any realized gains or losses on the sale of the short-term investments, are determined on a specific identification method, and such gains
and losses are reflected in earnings during the period in which gains or losses are realized. The securities that the Group has the positive
intent and the ability to hold to maturity are classified as held-to-maturity securities and stated at amortized cost.
Investments in equity securities
The Group accounts for its investments in equity securities in accordance with ASC Subtopic 321, Investments – Equity Securities
(“ASC 321”). These securities have readily determinable fair values and are generally held for resale in anticipation of short-term market
movements and therefore the Group classifies them as investment in equity securities in current assets which are carried at fair value at
each balance sheet date. Gains and losses, both realized and unrealized, are included in (Losses and impairment) Gains on equity
securities held in the consolidated statements of comprehensive income/(loss).

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-13
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Investments (continued)
Long-term time deposits
Long-term time deposits comprise of deposits placed with certain bank with a maturity of one to three years. Unrealized gains from
long-term time deposit of RMB19,880,287, RMB4,726,875 and RMB4,534,833 (USD657,489) were recognized for the  years ended
December 31, 2020, 2021 and 2022, respectively. As of December 31, 2021 and 2022, RMB 130,000,000 and RMB 130,000,000 (USD
18,848,228) of which, respectively, was pledged with banks as security in relation to the guarantee for the long-term bank loans and
restricted to use (Note 13).
Long-term investments
The Group’s long-term investments consist of equity-method investments, equity investments with and without readily determinable
fair values and an available-for-sale debt investment.
Investments in entities in which the Group can exercise significant influence but does not own a majority equity interest or control
are accounted for using the equity method of accounting in accordance with ASC Topic 323, Investments-Equity Method and Joint
Ventures (“ASC 323”). The share of earnings or losses of the investee are recognized in the consolidated statements of comprehensive
income/(loss). Equity method adjustments include the Group’s proportionate share of investee income or loss, adjustments to recognize
certain differences between the Group’s carrying value and its equity in net assets of the investee at the date of investment, impairments,
and other adjustments required by the equity method. The Group assesses its equity investment for other-than-temporary impairment by
considering factors as well as all relevant and available information including, but not limited to, current economic and market
conditions, the operating performance of the investees including current earnings trends, the general market conditions in the investee’s
industry or geographic area, factors related to the investee’s ability to remain in business, such as the investee’s liquidity, debt ratios, and
cash burn rate and other company-specific information.
Investments in equity securities that have readily determinable fair values (except those accounted for under the equity method of
accounting or those that result in consolidation of the investee) are measured at fair value, with unrealized gains and losses from fair
value changes recognized (Losses and impairment) Gains on equity securities held in the consolidated statements of comprehensive
income/(loss).
For equity securities without readily determinable fair value and do not qualify for the existing practical expedient in ASC Topic
820, Fair Value Measurements and Disclosures (“ASC 820”) to estimate fair value using the net asset value per share (or its equivalent)
of the investment, the Company elected to use the measurement alternative method under ASC 321 to measure those investments at cost,
less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar
investments of the same issuer, if any. These investments are measured at fair value on a nonrecurring basis when there are events or
changes in circumstances that may have a significant adverse effect. An impairment loss is recognized in the consolidated statements of
comprehensive income/(loss) equal to the amount by which the carrying value exceeds the fair value of the investment. Significant
judgments are required to determine (i)  whether observable price changes are orderly transactions and identical or similar to an
investment held by the Company; and (ii) the selection of appropriate valuation methodologies and underlying assumptions, including
expected volatility and the probability of exit events as it relates to liquidation and redemption features used to measure the price
adjustments for the difference in rights and obligations between instruments.
The available-for-sale debt investment is redeemable shares issued by a private company that is redeemable any time at the Group’s
option, which are remeasured at fair value. All changes in the carrying amount of these debt investments are recognized in other
comprehensive income/(loss). An impairment loss on the available-for-sale debt investments, if any, is recognized in earnings when the
decline in value is determined to be other-than-temporary. The amount of the total other-than-temporary impairment related to the credit
loss shall be recognized in earnings. The amount of the total other-than-temporary impairment related to other factors shall be recognized
in other comprehensive income/(loss), net of applicable taxes.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-14
2.   SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Accounts receivable, net of allowance for doubtful accounts
Trade receivables mainly consist of franchise fees receivable, rental amounts due from individual and corporate customers and travel
agents, and sublease rental receivables due from third-party merchandisers, which are recognized and carried at the original invoice
amounts less an allowance for doubtful accounts. The Group establishes an allowance for doubtful accounts primarily based on the age
of the receivables and factors surrounding the credit risk of specific franchisees, customers, and merchandisers. Accounts receivable
balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is
considered remote.
Inventories
Inventories mainly consist of small appliances, bedding and daily consumables. Small appliances and bedding are stated at cost, less
accumulated amortization, and are amortized over their estimated useful lives, generally one year, from the time they are put into use.
Daily consumables are expensed when used.
Loans receivable
Loans receivable are carried at the original loan principal and accrued interest based on the contract rate, less an allowance for
uncollectible accounts, as appropriate. The Group classified loans receivable as long-term or short-term investments according to their
contractual maturity. The allowance for uncollectible accounts is estimated based on an assessment of the payment history, the existence
of collateral, current information and events, and the facts and circumstances around the credit risk of the debtors. As of December 31,
2021 and 2022, all loans receivable which are past due are nonaccrual.
Property and equipment, net
Property and equipment, net are stated at cost less accumulated depreciation and any recorded impairment. Depreciation of property
and equipment is provided using the straight-line method over the following expected useful lives:
Leasehold improvements
    
Over the shorter of the lease term or estimated useful lives
Buildings
20 years
Furniture, fixtures and equipment
3-5 years
Motor vehicles
5 years
Construction in progress represents leasehold improvements under construction or being installed and is stated at cost. Cost
comprises original cost of property and equipment, installation, construction and other direct costs. Construction in progress is
transferred to leasehold improvements and depreciation commences when the asset is ready for its intended use.
Expenditures for repairs and maintenance are expensed as incurred, whereas the costs of betterments that extend the useful life of
property and equipment are capitalized as additions to the related assets. Gain or loss on disposal of property and equipment, if any, is
recognized in the consolidated statements of comprehensive income/(loss) as the difference between the net sales proceeds and the
carrying amount of the underlying asset.

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GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-15
2.   SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Intangible assets
Intangible assets are carried at cost less accumulated amortization and any recorded impairment. Intangible assets acquired through
business combinations are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability”
criterion, and are measured at fair value upon acquisition. Favorable leases acquired in business combinations before the adoption of
ASC Topic 842, Leases (“ASC 842”) are amortized over the remaining operating lease term. Reacquired rights represent the franchise
right the Group previously granted to the acquiree through franchise agreements and are amortized over the next renewal date in the
applicable agreement.
The favorable lease agreements lease agreements in which the Group acts as a lessee were reclassified to operating lease right-of-use
assets on January 1, 2022, upon adoption of ASC 842, Leases, which are amortized combining with right-of-use assets over remaining
operating lease terms. The favorable lease agreements in which the Group acts as a lessee were accounted as intangible assets as before,
which are amortized over remaining operating lease terms.
Amortization is computed using the straight-line method over the following estimated useful lives:
Trademark
    
10 years or indefinite life
Technology
10 years
Network rights
10 years
Purchased software
5-10 years
Reacquired rights
the remaining franchise term
The Group at the end of each reporting period evaluates whether events and circumstances continue to support the indefinite useful life
of relevant intangible assets. Impairment is tested annually or more frequently if events or changes in circumstances indicate that it might
be impaired. Impairment loss is recognized based on the excess of the carrying value of the indefinite-lived intangible asset over its fair
value at the time of the assessment. As of December 31, 2020 and 2021, the estimated fair values of the indefinite-lived intangible assets
significantly exceeded of their respective carrying values. No impairment loss was recognized for the intangible assets the years ended
December 31, 2020 and 2021 and an impairment loss of RMB 12,000,345 (USD 1,739,886) of indefinite-lived trademark was recorded
in other general expenses in the consolidated statement of comprehensive loss before the deconsolidation of Urban during the year ended
December 31, 2022 (Note 4).

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-16
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Business combinations
The Group accounts for all business combinations under the purchase method in accordance with ASC 805, Business Combinations.
The cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred,
and equity instruments issued. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities
and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the
extent of any noncontrolling interests. The excess of (i) the total of the cost of the acquisition, fair value of the noncontrolling interests
and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of
the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the identifiable net assets of the acquiree, the
difference is recognized directly in earnings.
The determination and allocation of fair values to the identifiable net assets acquired, liabilities assumed and noncontrolling interest
is based on various assumptions and valuation methodologies requiring considerable judgment. The most significant variables in these
valuations are discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions
and estimates used to determine the cash inflows and outflows. The Group determines discount rates to be used based on the risk inherent
in the acquiree’s current business model and industry comparisons. Although the Group believes that the assumptions applied in the
determination are reasonable based on information available at the date of acquisition, actual results may differ from forecasted amounts
and the differences could be material.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable assets acquired less liabilities
assumed of an acquired business. The Group’s goodwill at December 31, 2020 and 2021 was related to its acquisition of subsidiaries and
business. The Group follows ASC subtopic 350-20, Intangibles-Goodwill and Other: Goodwill. Goodwill and business acquired in a
business combination are not amortized, but instead tested for impairment at least annually, or more frequently if certain circumstances
indicate a possible impairment may exist.
In accordance with ASC 350-20, the Group has assigned and assessed goodwill for impairment at the reporting unit level. A
reporting unit is an operating segment or one level below the operating segment. The Group has determined that it has one reporting unit.
The Group has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step test in
accordance with ASC 350-20, Testing Goodwill for Impairment. If the Group believes, as a result of the qualitative assessment, that it is
more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, the two-step quantitative impairment test
described above is required. Otherwise, no further testing is required. In the qualitative assessment, the Group considers primary factors
such as industry and market considerations, overall financial performance of the reporting unit, and other specific information related to
the operations. In performing the two-step quantitative impairment test, the first step compares the carrying amount of the reporting unit
to the fair value of the reporting unit based on either quoted market prices of the ordinary shares or estimated fair value using a
combination of the income approach and the market approach. If the fair value of the reporting unit exceeds the carrying value of the
reporting unit, goodwill is not impaired and the Group is not required to perform further testing. If the carrying value of the reporting unit
exceeds the fair value of the reporting unit, then the Group must perform the second step of the impairment test in order to determine the
implied fair value of the reporting unit’s goodwill. The fair value of the reporting unit is allocated to its assets and liabilities in a manner
similar to a purchase price allocation in order to determine the implied fair value of the reporting unit goodwill. Before the adoption of
ASU 2017 04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), if the
carrying amount of the goodwill is greater than its implied fair value, the excess is recognized as an impairment loss.
In 2020, the Group elected to choose to bypass the qualitative assessment and proceed directly to perform a quantitative test. In
2021, the Group performed a qualitative assessment for its operating unit. No impairment was recorded for the years ended December
31, 2020 and 2021.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-17
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Goodwill (continued)
The Group adopted ASU 2017-04 on January 1, 2022 on a prospective basis. which requires a one-step impairment test in which an
entity compares the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which
the carrying amount exceeds the reporting unit’s fair value, if any. Impairment loss of RMB91,236,480 (USD13,228,046) of goodwill
was recorded before the Group deconsolidated Argyle Beijing and Urban during the year ended December 31, 2022(Note 4).
Impairment of long-lived assets
The Group evaluates its property and equipment, other finite-lived assets and operating lease right-of-use assets for impairment
individually or as a group at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of
the other assets and liabilities. Whenever events or changes in circumstances indicate that these assets may not be recoverable, the Group
compares the carrying amount of the asset (or group of assets) to the sum of future undiscounted net cash flows expected to result from
the use of the asset (or group of assets) and its eventual disposition. If the carrying amount is higher than the sum of undiscounted future
cash flows, an impairment loss is measured based on the excess of the carrying amount of the asset (or group of asset) over its fair value.
 The carrying amount of the asset (or the long-lived assets in the asset group on a pro rata basis using the relative carrying amounts) is
reduced to the extent not lower than the fair value of the asset. The adjusted carrying amounts after an impairment charge represent the
new cost basis and is depreciated over their remaining useful lives. No impairment was recorded for the years ended December 31, 2020
and 2021. During the year ended December 31, 2022, due to the continued underperformances relative to the projected operating results,
the Group recorded a total impairment loss of RMB 48,306,360 (USD 7,003,764) for certain hotels, among which RMB 28,395,905
(USD 4,117,019) were recorded before the deconsolidation of Argyle Beijing and Shandong Xinhui (Note 4).
Revenue recognition
Leased and operated hotel revenues
Revenues from leased-and-operated hotels are primarily derived from hotel operations, including the rental of rooms and food and
beverage sales. Each of these products and services represents an individual performance obligation and, in exchange for these services
and goods, the Group receives fixed amounts based on fixed rates or fixed standalone selling price. Revenue is recognized when rooms
are occupied, and food and beverages are sold as the respective performance obligations are satisfied.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-18
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Revenue recognition (continued)
Leased and operated hotel revenues (continued)
Sublease rental revenues are derived from subleasing partial space of the leased-and-operated hotels to third-parties. In accordance
with the provisions of ASC 842, since the Group has not been relieved as the primary obligor of the head lease, the Group cannot net the
sublease income against its lease payment to calculate the lease liability and ROU asset. The Group’s practice has been, and will continue
to, straight-line the sub-lease income over the term of the sublease, which is consistent with the accounting treatment under ASC 840.
The sublease rental revenue is recorded in leased-and-operated hotels revenue in the consolidated statements of comprehensive
income/(loss) amounted to RMB77,676,665, RMB74,689,226 and RMB61,578,703 (USD8,928,073) for the years ended December 31,
2020, 2021 and 2022, respectively.
Franchise and managed hotel revenues
The franchise and managed agreement contains the following promised services:
●
Intellectual Property (“IP”) license grant the right to access the Group’s hotel system IP, including brand names.
●
Pre-opening services include providing services (e.g., property design, leasehold improvement, construction project
management, systems installation, personnel recruiting and training, etc.) to the franchisees to assist in preparing for the hotel
opening.
●
System maintenance services include providing standardization hotel property management system (PMS), central reservation
system (CRS) and other internet related services.
●
Hotel management services include providing day-to-day management services of the hotels for the franchisees.
The promises to provide pre-opening services and system maintenance services are not distinct performance obligation because they
are attendant to the license of IP. Therefore, the promises to provide pre-opening services and system maintenance services are combined
with the license of IP to form a single performance obligation. Hotel management services forms a single distinct performance
obligation.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-19
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Revenue recognition (continued)
Franchise and managed hotel revenues (continued)
Revenues from franchised-and-managed hotels are derived from franchise agreements where the franchisees are required to pay
(i) an initial one-time non-refundable franchise fee, and (ii) continuing franchise fees, which mainly consist of on-going management and
service fees based on a certain percentage of the room revenues of the franchised-and-managed hotels and central reservation system
(“CRS”) usage fee based on a fixed rate per transaction. For franchised-and-managed hotels, the Group has a performance obligation to
provide franchisees a license to its hotel system intellectual property for use of certain of its brand names. The one-time franchise fees
are fixed consideration payable upon submission of a franchise application or renewal and are recognized on a straight-line basis over the
initial or renewal term of the franchise agreements. The Group does not consider this advance consideration to include a significant
financing component, since it is used to protect the Group from the franchisees failing to adequately complete some or all of its
obligations under the contract. The continuing fees represent variable consideration, as the transaction price is based on a percentage of
underlying service revenue is recognized by the franchisees’ operations. The Group recognizes continuing franchise fees on a monthly
basis over the term of the agreement as those amounts become payable.
In addition, the Group designates hotel managers to certain hotels and accounts for hotel manager fees related to the hotels under the
franchise program as revenues. Pursuant to the franchise-and-management agreements, the Group charges the franchisees fixed hotel
manager fees to compensate the Group for the franchised-and-managed hotel managers’ salaries, social welfare benefits and certain other
out-of-pocket expenses as incurred. The hotel manager fee is recognized as revenue on a  monthly basis. During the  years ended
December 31, 2020, 2021 and 2022, the hotel manager fees that were recognized as part of franchised-and-managed hotels revenue were
RMB112,729,886, RMB131,027,473 and RMB115,738,098 (USD16,780,447), respectively.
Other Revenues
Other revenues are derived from selling of goods through the Company’s online mall and sale of hotel related products to
franchisees. Revenues are recognized upon customers’ acceptance.
Membership Program
The Group invites its customers to participate in a membership program with four tiers of membership  – E-membership, R-
membership, gold membership and platinum membership. A one-time membership fee is charged for new members except for the E-
membership. The membership automatically expires after two years in the event of non-usage and is automatically renewed if used at
least once within a two-year period. Members enjoy discounts on room rates, priority in hotel reservation, and accumulate membership
points for their paid stays, which can be redeemed for membership upgrades, room night awards and other gifts within two years after the
points are earned.
Membership fees from the Group’s membership program are earned and recognized on a straight-line basis over the expected
membership duration of the different membership levels. Such duration is estimated based on the Group’s and management’s experience
and is adjusted on a periodic basis to reflect changes in membership retention. The membership duration is estimated to be three to
five years depending on membership level.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-20
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Membership Program (continued)
Membership points that are earned by members when they stay at the hotels represent a material right to free or discounted goods or
services in the future. The membership program has one performance obligation that consists of marketing and managing the program
and arranging for award redemptions by members. The amount of revenue the Group recognize upon point redemption is impacted by
the estimate of the “breakage” for points that members will never redeem, which amount were included in revenues from leased and
operated hotel or revenues from franchised and managed hotels depending on the type of hotels the membership was sold at. The Group
estimates breakage based on the Group’s historical experience and expectations of future member behavior and will true up the estimated
breakage at end of each period. The Group recognized revenue net of reimbursement paid to franchisees as its performance obligation is
to facilitate the transaction between the member and the franchised and managed hotels.
PRC Value-Added Taxes and related tax surcharges
Starting from May 2016, the accommodation services of the Group are subject to 6% of Value-Added Taxes.
The Group is subject to education surtax and urban maintenance and construction tax, on the services provided in the PRC.
Advertising and promotional expenses
Advertising related expenses, including promotion expenses and production costs of marketing materials, are charged to the
consolidated statements of comprehensive income/(loss) as incurred, and amounted to RMB38,934,867, RMB22,906,044 and
RMB12,347,881 (USD1,790,274) for the years ended December 31, 2020, 2021 and 2022, respectively.
Government subsidies
Government subsidies are received from provincial and local governments for operating a business in their jurisdictions and
compliance with specific policies promoted by the local governments. Such subsidies allow the Group full discretion to utilize the funds
and are used by the Group for general corporate purposes. During the  years ended December  31, 2020, 2021 and 2022, the Group
received financial subsidies of RMB20,094,745, RMB16,993,539 and RMB11,466,168 (USD1,662,438), respectively, from various local
PRC government authorities. There are no defined rules and regulations to govern the criteria necessary for companies to receive such
benefits, and the amount of financial subsidy is determined at the discretion of the relevant government authorities. Such amounts are
recorded as other operating income when received as the amount of the subsidies and the timing of payment are determined solely at the
discretion of the relevant government authorities and there is no assurance that the Group will continue to receive any or similar
subsidies in the future.
Interest
Interest income is mainly generated from bank deposits and other interest earning financial assets and is recognized on an accrual
basis using the effective interest method.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-21
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Leases
Operating Leases – Lessee under ASC 842
The Group leases hotel properties from property owners. In evaluating whether an agreement constitute a lease. the Group reviews
the contractual terms to determine which party obtains both the economic benefits and control of the assets at the inception of the
contract. The Group categorizes leases with contractual terms longer than twelve months as either operating or finance lease at the
commencement date of a lease. However, the Group has no finance leases for any of the periods presented. The Group recognizes a lease
liability for future fixed lease payments and a right-of-use (“ROU”) asset representing the right to use the underlying asset for the lease
term. The lease term is based on the non-cancellable term of the lease and may contain options to extend the lease when it is reasonably
certain that the Company will exercise the option. Lease liabilities are recognized at commencement date based on the present value of
fixed lease payments over the lease term using the rate implicit in the lease, if available, or the Group’s incremental borrowing rate. As
its leases do not provide an implicit borrowing rate, the Group uses an incremental borrowing rate based on the estimated rate of interest
for collateralized borrowing over a similar term of the lease payments at the commencement date. Current maturities of operating lease
liabilities are classified as operating lease liabilities, current in the Group’s consolidated balance sheets. Most leases have initial terms
ranging from 5 to 22 years. The Group’s lease agreements may include non-lease components, mainly common area maintenance, which
are combined with the lease components as the Group elects to account for these components as a single lease component, as permitted.
Lease expense for fixed lease payments is recognized on a straight-line basis over the lease term. The Group’s lease agreements do not
contain any significant residual value guarantees or restricted covenants.
The ROU assets are measured at the amount of the lease liabilities with adjustments, if applicable, for lease prepayments made prior
to or at lease commencement, initial direct costs incurred by the Group, deferred rent and lease incentives, and any off-market terms (that
is, favorable or unfavorable terms) present in the lease when the Group acquired leases in a business combination in which the acquiree
acts as a lessee. The Group evaluates the carrying value of ROU assets if there are indicators of impairment and reviews the
recoverability of the related asset group.
The Group reassesses of a contract is or contains a leasing arrangement and re-measures ROU assets and liabilities upon
modification of the contract. The Group will derecognize ROU assets and liabilities, with difference recognized in the income statement
on the contract termination.
Operating Leases – Lessee under ASC 840
Before January 1, 2022, leases where the Group is the lessee, and substantially all the rewards and risks of ownership of assets
remain with the lessor are accounted for as operating leases. Rentals applicable to such operating leases are recognized on a straight-line
basis over the lease term. Certain of the operating lease agreements contain rent holidays. Rent holidays are considered in determining
the straight-line rent expense to be recorded over the lease term.
Operating Leases – Sublease under ASC 842 and ASC 840
The Group subleases property which are not used to operate hotels to third parties under operating leases. In accordance with the
provisions of ASC 842, since the Group has not been relieved as the primary obligor of the head lease, the Group cannot net the sublease
income against its lease payment to calculate the lease liability and ROU asset. Our practice has been, and will continue to, straight-line
the sub-lease income over the term of the sublease, which is consistent with the accounting treatment under ASC 840.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-22
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Income taxes
Income taxes are provided for using the liability method. Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates or change in tax status is recognized in income in the period the change in tax
status occurs or the change in tax rates or tax law is enacted. A valuation allowance is provided to reduce the amount of deferred tax
assets if it is considered more likely than not that some or all of the deferred tax assets will not be realized.
In accordance with ASC subtopic 740-10, Income Taxes, Overall, the Group recognizes the benefit of a tax position if the tax
position is more likely than not to prevail based on the technical merits of the tax position. Tax positions that meet the “more likely than
not” threshold are measured at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon
settlement.
The Group estimates its liability for unrecognized tax benefits which are periodically assessed and may be affected by changing
interpretations of laws, rulings by tax authorities, changes and/or developments with respect to tax audits, and expiration of the statute of
limitations. The ultimate outcome for a particular tax position may not be determined with certainty prior to the conclusion of a tax audit
or appeal or litigation process. The actual benefits ultimately realized may differ from the Group’s estimates. As each tax audit is
concluded, adjustments, if any, are recorded in the Group’s financial statements. Additionally, in future periods, changes in facts,
circumstances and new information may require the Group to adjust the recognition and measurement estimates with regard to individual
tax positions. Changes in recognition and measurement estimates are recognized in the period in which the changes occur. The Group has
elected to include interest and penalties related to an uncertain tax position in “income tax expense (benefit)” in the consolidated
statements of comprehensive income/(loss).
Foreign currency translation and transactions
The reporting currency of the Group is the Renminbi (“RMB”). The functional currency of the Company, GreenTree Samoa,
GreenTree Suites, PHI and the entities incorporated in Hong Kong is the United States dollar (“USD”). The financial records of PRC
subsidiaries of the Company are maintained in the local currency, the Renminbi (“RMB”), which is their functional currency.
Monetary assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the
functional currencies at the prevailing rates of exchange at the balance sheet date. Nonmonetary assets and liabilities are re-measured
into the applicable functional currencies at historical exchange rates. Transactions in currencies other than the applicable functional
currencies during the year are converted into the functional currencies at the applicable rates of exchange prevailing on the transaction
dates. Transaction gains and losses are recognized in “interest income and other, net” in the consolidated statements of comprehensive
income/(loss).
Assets and liabilities are translated into RMB at the exchange rate at the balance sheet date. Equity accounts are translated at
historical exchange rates, and revenues, expenses, gains and losses are translated using the average rate for the  year. Translation
adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive loss in
the consolidated statements of comprehensive income/(loss).

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-23
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Convenience translation
Translations of amounts from RMB into U.S. dollars into U.S. dollars are solely for the convenience of the reader and were
calculated at the noon buying rate of USD1 to RMB6.8972 on December 31, 2022, as set forth in H.10 statistical release of the Federal
Reserve Board. The translation is not intended to imply that the RMB amounts could have been, or could be, converted, realized or
settled into U.S. dollars at that rate on December 31, 2022, or at any other rate.
Fair value
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or
permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it
considers assumptions that market participants would use when pricing the asset or liability.
Authoritative literature provides a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based
upon the lowest level of input that is significant to the fair value measurement. The Group follows ASC subtopic 820-10, Fair Value
Measurements and Disclosures, which establishes a three-tier fair value hierarchy, and prioritizes the inputs used in measuring fair value
as follows:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable
for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or
liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which
significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the
measurement of the fair value of the assets or liabilities.
Assets and Liabilities Measured at Fair Value on a recurring basis
Investments in equity securities with readily determinable fair values are measured using quoted market prices, and are recorded at
fair values at each balance sheet date. The fair value of the Group’s investments in wealth management products are measured using the
income approach, based on quoted market interest rates of a similar instrument and other significant inputs derived from or corroborated
by observable market data.
The payable for contingent consideration and the returnable consideration from Urban Hotel Group are based on the achievement of
certain financial targets in accordance with the acquisition agreements for the various periods.
For the available-for-sale debt securities, the Group uses a combination of valuation methodologies, including income approach and
option pricing models based on the Group’s best estimate, which is determined by using information including but not limited to the
future cash flow forecast, discount rate, expected volatility, and discounts for lack of marketability and control.
The carrying values of other financial instruments, which consist of cash and cash equivalents, time deposits, accounts receivable,
loans receivable, amounts due from related parties, accounts payable and amounts due to related parties are recorded at cost which
approximates their fair value due to the short-term nature of these instruments. The Group does not use derivative instruments to manage
risks.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-24
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Fair value (continued)
Assets and Liabilities Measured at Fair Value on a recurring basis (continued)
The following table summarizes the Company’s financial assets and liabilities measured and recorded at fair value as of
December 31, 2021 and 2022 on a recurring basis:
    
    
Fair Value Measurements at Reporting Date Using
Quoted Prices 
in Active 
Significant 
Markets for 
Other 
Significant 
As of 
Identical 
Observable 
Unobservable 
December 31, 
Assets 
Inputs 
Inputs 
Description
2021
 
(Level 1)
    
(Level 2)
    
(Level 3)
Other assets
 
   
   
   
  
Returnable consideration from acquisition of Urban
 
5,385,583
—  
—  
5,385,583
Short-term investments
 
 
   
   
  
Investments in wealth management products
 
147,458,675
—  
147,458,675  
—
Investments in equity securities
 
 
   
   
  
Equity securities with readily determinable fair value
 
157,988,851  
157,988,851  
—  
—
Long-term investments
 
 
 
 
Equity securities with readily determinable fair value
 
39,852,428  
39,852,428  
—  
—
Available-for-sale debt securities
 
106,493,137
—  
—  
106,493,137
 
457,178,674  
197,841,279  
147,458,675  
111,878,720
    
    
Fair Value Measurements at Reporting Date Using
Quoted Prices 
in Active 
Significant 
Markets for 
Other 
Significant 
As of 
Identical 
Observable 
Unobservable 
December 31, 
Assets 
Inputs 
Inputs 
Description
2022
(Level 1)
    
(Level 2)
    
(Level 3)
Short-term investments
 
   
 
   
  
Investments in wealth management products
 
156,031,572
—  
156,031,572  
—
Investments in equity securities
 
 
   
   
Equity securities with readily determinable fair value
 
41,361,346  
41,361,346  
—  
—
Long-term investments
 
 
 
 
Equity securities with readily determinable fair value
 
27,408,446  
27,408,446  
—  
—
Available-for-sale debt securities
 
103,706,206
—  
—  
103,706,206
 
328,507,570  
68,769,792  
156,031,572  
103,706,206

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-25
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Fair value (continued)
Assets and Liabilities Measured at Fair Value on a recurring basis (continued)
Reconciliations of assets and liabilities categorized within Level 3 under the fair value hierarchy are as follows:
    
    
Available-for- 
Returnable 
sale debt 
consideration
securities
December 31, 2021
 
5,385,583  
106,493,137
Disposal of Urban
(5,385,583)
—
Net unrealized fair value decrease recognized in other comprehensive loss
 
—  
(2,786,931)
December 31, 2022
 
—  
103,706,206
December 31, 2022 (USD)
 
—  
15,035,986
Significant Unobservable Inputs
    
    
Inputs
    
Inputs
 
As of December 
As of December   
Financial Assets
Unobservable Input
31, 2021
31, 2022
 
Available-for-sale debt securities
 
WACC  
12 %
12 %
 
Discounts for lack of marketability and control  
34 %
44 %
 
Expected volatility  
42 %
52 %
Assets Measured at Fair Value on a non-recurring basis
The Group measures equity investments without readily determinable fair value and elected to use the measurement alternative at
fair value on a nonrecurring basis, in the cases of an impairment charge is recognized, fair value of an investment is remeasured in an
acquisition/a disposal, and an orderly transaction for identical or similar investments of the same issuer was identified. The non-recurring
fair value measurements to the carrying amount of an investment usually requires management to estimate a price adjustment for the
different rights and obligations between a similar instrument of the same issuer with an observable price change in an orderly transaction
and the investment held by the Company. The valuation methodologies involved require management to use the observable transaction
price at the transaction date and other unobservable inputs (level 3) such as volatility of comparable companies and probability of exit
events as it relates to liquidation and redemption preferences.
Fair value of the long-lived assets was determined by the Group based on the income approach using the discounted cash flow
associated with the underlying assets, which incorporated certain assumptions including projected hotels’ revenue, growth rates and
projected operating costs based on current economic condition, expectation of management and projected trends of current operating
results. Considerable management judgement is used to estimate future cashflows, particularly revenues expected to be generated from
the usage of the long-lived assets and estimates of the price market participants would pay to lease the operating lease right-use assets,
which are based on comparable market rental information that could be reasonably obtained for the property. Accordingly, actual results
may vary significantly from the Company estimates as they are forward-looking and include assumptions about economic and market
conditions with uncertain future outcomes.
Comprehensive income/(loss)
Comprehensive income/(loss) is defined as the changes in equity of the Group during a year from transactions and other events and
circumstances excluding transactions resulting from investments by owners and distributions to owners. Accumulated other

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-26
comprehensive income of the Group includes the foreign currency translation adjustments and unrealized gains(loss) on available-for-
sale investments.
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Comparative information
Certain of the prior year comparative figures have been reclassified to conform to the current year’s presentation.
Segment reporting
The Group operates and manages its business as a single segment. The Group’s chief operating decision maker has been identified as
the CEO of the Group. The results of operations of the Group are regularly reviewed by the Chief Executive Officer on a consolidated
basis. The Group primarily generates its revenues from customers in the PRC. Accordingly, no geographical segments are presented.
Substantially all of the Group’s long-lived assets are located in the PRC.
Employee benefits
The full-time employees of the Group’s PRC subsidiaries participate in a government mandated defined contribution plan, pursuant
to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese
labor regulations require that the PRC subsidiary of the Group to make contributions to the government for these benefits beyond the
contribution made. The total amounts for such employee benefits, which were expensed as incurred, RMB25,666,575, RMB36,617,173
and RMB45,051,494 (USD6,531,853) for the years ended December 31, 2020, 2021 and 2022, respectively.
Share-based compensation
Share based awards granted to employees are accounted for under ASC 718, “Compensation—Stock Compensation”, which requires
that such equity awards granted to employees be measured based on the grant date fair value and recognized as compensation expense a)
immediately at grant date if no vesting conditions are required; or b) using accelerated method, net of estimated forfeitures, over the
requisite service period, which is the vesting period.
Earnings per share
Class A and Class B ordinary shares have the same rights with regard to dividends and distributions upon liquidation of the Group.
Net income is allocated on a pro rata basis to the Class A and Class B ordinary shares to the extent that each class shares in income for
the period. Basic EPS for each class of ordinary shares is computed by dividing net income attributable to that class by the weighted
average number of ordinary shares outstanding of that class for the period. Diluted earnings per share is calculated by dividing net
income attributable to the Class A and Class B ordinary shares as adjusted for the effect of dilutive ordinary equivalent shares, if any, by
the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary share
equivalents are excluded from the computation of diluted per share if their effects would be anti-dilutive. Contingently issuable shares
relating to shares to be issued as a part of purchase consideration associated with business combinations, are included in the computation
of basic earnings per share only when there is no circumstance under which those shares would not be issued. Contingently issuable
shares are included in the denominator of the diluted calculation as of the beginning of the period or as of the inception date of the
contingent share arrangement, if later, only when dilutive and when all the necessary conditions have been satisfied as of the reporting
period end.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-27
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Concentration of credit risk
Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents,
restricted cash, accounts receivable, amounts due from related and loans receivable. As of December 31, 2021, the Group had
RMB288,545,669 and RMB29,070,237 of cash and cash equivalents and restricted cash that are held by financial institutions in the PRC
and by international financial institutions outside of the PRC, respectively. As of December 31, 2022, the Group had RMB663,759,671
(USD96,236,106)  and RMB2,544,290 (USD368,887) of cash and cash equivalents and restricted cash that are held by financial
institutions in the PRC and by international financial institutions outside of the PRC, respectively. Management believes that these
financial institutions are of high credit quality and continually monitors the credit worthiness of these financial institutions.
The Group conducts credit evaluations on its customers and generally does not require collateral or other security from such
customers. The Group periodically evaluates the creditworthiness of the existing customers in determining an allowance for doubtful
accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers.
The Group made loans to third-party individuals and related parties under loan agreements and is exposed to credit risk in case of
defaults by the debtors. The maximum amount of loss due to credit risk is limited to the total outstanding principal plus accrued interest
on the balance sheet date. As of December 31, 2021 and 2022, there were RMB965,475,805 and RMB1,073,930,780 (USD155,705,327)
of loans receivable outstanding. The Group evaluates and monitors the credit worthiness of the debtors and records an allowance for
uncollectible accounts based on an assessment of the payment history, the existence of collateral, current information and events, and the
facts and circumstances around the credit risk of the debtor.
Currency Convertibility Risk
Substantially all of the Group’s operating activities are transacted in RMB, which is not freely convertible into foreign currencies.
All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized by the PRC
government to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency
payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with
suppliers’ invoices, shipping documents and signed contracts.
Foreign Currency Exchange Rate Risk
The functional currency of the Company is USD, and the reporting currency is RMB. Since July 21, 2005, RMB has been permitted
by the PRC government to fluctuate within a managed band against a basket of certain foreign currencies. The appreciation of the USD
against the RMB was approximately 8.23% in 2022. Any significant revaluation of RMB may materially and adversely affect the cash
flows, operating results and financial position of the Group. As a result, an appreciation of RMB against USD would result in foreign
currency translation loss when translating the net assets of the Group from USD into RMB.
For the years ended December 31, 2020, 2021 and 2022, the net foreign currency translation loss resulting from the translation from
USD to RMB reporting currency recorded in other comprehensive loss recorded RMB19,714,207, RMB6,497,403 and RMB11,361,872
(USD1,647,317), respectively.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-28
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Adopted Accounting Standards
In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases (ASC 842), as amended,
which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. ASC 842 requires
most leases to be recognize a ROU asset and lease liability on the balance. On January 1, 2022, the Company adopted ASU 2016-02,
using the modified retrospective transition method and elected the transition option to use an effective date of January 1, 2022 as the date
of initial application. As a result, the comparative periods were not restated.
The Group has elected the package of practical expedients permitted which allows the Company not to reassess the following at
adoption date: (i) whether any expired or existing contracts are or contains a lease, (ii) the lease classification for any expired or existing
leases, and (iii) initial direct costs for any expired or existing leases (i.e. whether those costs qualify for capitalization under ASU 2016-
02).
The cumulative effect of the changes made to the Group’s consolidated balance sheet as of January 1, 2022 for the adoption of ASU
2016-02 is as follows:
December 31, 2021
January 1, 2022
Effect of adoption
    
As reported
    
ASU 2016-02
    
As adjusted
Assets
    
Favorable lease
 
32,844,929
(32,844,929)
—
Prepaid rent
 
15,454,967
(15,454,967)
—
Operating lease right-of-use assets
—
1,830,043,887  
1,830,043,887
Total assets
 
48,299,896
1,781,743,991
1,830,043,887
Liabilities
Accrued expenses and other current liabilities
 
27,957,242
(27,957,242)
—
Deferred rent
 
70,769,648
(70,769,648)
—
Operating lease liability, current
—
177,938,604
177,938,604
Operating lease liability, non-current
—
1,702,532,277
1,702,532,277
Total liabilities
 
98,726,890
1,781,743,991
1,880,470,881

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-29
2.    SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
Adopted Accounting Standards (continued)
The adoption of ASU 2016-02 did not materially affect the consolidated statements of income or consolidated statements of cash
flows and had no impact on the debt covenant compliance under the current agreements.
Accounting Standards Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments. This ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans
and other financial instruments held by financial institutions and other organizations. This ASU requires the measurement of all expected
credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and
supportable forecasts. This ASU requires enhanced disclosures to help investors and other financial statement users better understand
significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of our
portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts
recorded in the financial statements. In November 2019, FASB issued ASU 2019-10 to delay the effective date of this standard for
private companies. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments
— Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which, among other things, provides
entities with practical expedients and policy elections related to the presentation and disclosure of accrued interest and the related
allowance for credit losses and clarifies how to disclose line-of-credit arrangements that are converted to term loans in the vintage table
disclosure. ASU 2019-04 has the same effective date as the new credit impairment standard for entities that have not yet adopted the
standard. In March 2022, the FASB issued ASU 2022-02, Financial Instruments — Credit Losses (Topic 326) — Troubled Debt
Restructurings and Vintage Disclosures. The ASU eliminates the recognition and measurement guidance on troubled debt restructurings
(TDRs) for entities that have adopted ASU 2016-13 (Topic 326) and enhances disclosures for certain loan refinancings and restructurings
by creditor for borrowers experiencing financial difficulty. It also requires public business entities to present current-period gross-write-
offs, on a current year-to-date basis, by year of origination in their vintage disclosures. For entities that have not adopted ASU 2016-13
(Topic 326), the effective dates are the same as for that ASU. The amendments should be applied prospectively, except that an entity has
the option to apply a modified retrospective transition method related to the recognition and measurement of TDRs, which will result in a
cumulative-effect adjustment to retained earnings in the period of adoption. The amendments in this ASU are effective for the Group
beginning January 1, 2023 including interim periods within the fiscal year. The Group is in the process of evaluating the impact of
adoption of this guidance on the Group’s consolidated financial statements.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers (“ASU 2021-08”). The amendments create an exception to the general recognition
and measurement principal in ASC 805, Business Combinations to measure assets and liabilities acquired in a business combination at
fair value. Instead, an acquirer in a business combination will be required to apply ASC 606 to recognize and measure contract assets and
contract liabilities that result from contracts accounted for under ASC 606 on the acquisition date and will generally result in the acquirer
recognizing amounts consistent with those recorded by the acquiree immediately before the acquisition date. ASU 2021-08 is effective
for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The
Group is in the process of evaluating the impact of adoption of this guidance on the Group’s consolidated financial statements.
In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities
Subject to Contractual Sale Restrictions, which clarifies that a contractual restriction on the sale of an equity security is not considered
part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify
that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. This guidance also requires
certain disclosures for equity securities subject to contractual sale restrictions. The new guidance is required to be applied prospectively
with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This guidance
is effective for the Company for fiscal years beginning after December 15, 2023, including interim periods therein. Early adoption is
permitted. The Company does not expect that the adoption of this guidance will have a material impact on its financial position, results
of operations and cash flows.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-30
3.    BUSINESS COMBINATIONS
Business combinations in 2021:
During the years ended 2021, the Group completed three business combinations. The total consideration amounted to
RMB23,000,000 (USD3,609,202). The consideration paid is RMB19,530,000 (USD3,064,683). The results of the acquired hotel’s
operation have been included in the Company’s consolidated financial statements since its respective dates of acquisition. The Group
completed the valuations necessary to assess the fair value of the acquired assets and liabilities and the non-controlling interests (if
applicable) with the assistance from an independent valuation firm, resulting from which the amounts of goodwill were determined and
recognized as of the respective acquisition dates. Goodwill, which is non-deductible for tax purposes, is primarily attributable to the
synergies expected to be achieved from the acquisitions. The initial accounting is incomplete as the valuations of intangible assets.
The net revenue and net loss of the acquire included in the consolidated statements of operations for the year ended December 31,
2021 were not material. Neither the results of operations since the acquisition dates nor the pro forma results of operations of the
acquirees were presented because the effects of these business combinations, individually and in the aggregate, were not significant to
the Company’s consolidated results of operations.
The following is a summary of the fair values of the aggregate assets acquired and liabilities assumed:
    
2021
     Amortization Period
Property and equipment
 
92,075  
3-5 years
Intangible assets
 
   
  
Trademark
 
36,896,000  
10 years
Goodwill
 
20,588,461  
  
Noncontrolling interest
 
(34,576,536) 
  
Total
 
23,000,000  
  
Business combinations in 2020:
During the years ended 2020, the Group completed one business combinations of one hotel. The total consideration amounted to
RMB2,200,000, among which RMB153,251 was allocated to goodwill. The business acquisition was accounted for under purchase
accounting. The acquired hotel was considered insignificant. The results of the acquired hotel’s operation have been included in the
Company’s consolidated financial statements since its respective dates of acquisition.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-31
4.    
DECONSOLIDATIONS
Deconsolidation of Argyle
The Group became the major shareholder of Argyle Beijing and its subsidiaries (“Argyle”) since April 2019. Starting late May 2022,
the Group has been in a dispute with Mr. Kevin Zhang, the minority shareholder of Argyle, as to the performance of relevant transaction
documents and/or compliance with local laws and regulations by Mr. Zhang. As a result, the Group no longer has the power and ability
to direct the relevant activities of Argyle, and therefore, has deconsolidated it since June 2022. The Group conducted an impairment
assessment and recorded impairment of RMB17,054,641(USD2,472,691), RMB700,762(USD101,600) and RMB42,198,903
(USD6,118,266) for the property and equipment, intangible assets with definite lives and goodwill respectively, related to the business of
Argyle before the deconsolidation. The Group measured the retained interest in Argyle at the then fair value of RMB48,000,000
(US$6,959,346) estimated with the assistance of a third-party independent valuer and recorded a disposal loss of RMB13,944,925
(USD2,021,824). The impairment of property and equipment, intangible assets with definite lives and disposal losses are included in
“Other general expenses” in the consolidated statements of comprehensive income/(loss) before and upon the deconsolidation in 2022.
The Group has been and will continue to vigorously pursue all legal remedies available to it; however, it has not been able to make
any management decisions or have any meaningful influence over the operation of Argyle. Therefore, the Group accounts for its equity
interests in Argyle using the measurement alternative method under ASC 321 (Note 11) and an impairment loss of RMB 42,000,000
(USD 6,089,428) was subsequently recorded in “(Losses and impairment) Gains on equity securities held” in the consolidated statements
of comprehensive income/(loss) for the year ended December 31, 2022. The carrying value of the investment in Argyle at December 31,
2022 was insignificant.
The Group estimated fair value using the income approach and the market approach. The fair value determined using the income
approach was compared with comparable market data and reconciled, as necessary，which is determined by using information including
but not limited to the future cash flow forecast, discount rate, and a discount for lack of marketability and control.
Deconsolidation of Urban
In November 2022, the Group and the minority shareholder of Urban entered into definitive agreements for the minority shareholder
and its designated person to repurchase all of the equity interest in Urban and its subsidiaries held by the Group. As of November 25,
2022, the transaction was completed and since then the Group deconsolidated Urban. The total consideration of RMB 142,971,057
consisted of 870,908 ordinary shares of the Company with a fair value of RMB 16,971,057 (USD 2,460,572) and RMB126,000,000
(USD 18,268,283) in cash. RMB 88,200,000(USD 12,787,798) of total cash consideration was received in 2022 and the remaining
receivables are included in “Other current assets” of consolidated balance sheets as of December 31,2022. The shares were received in
March 2023.
The Group conducted impairment assessments and recognized impairment losses of RMB 12,000,345 (USD 1,739,886), and RMB
10,640,502 (USD 1,542,728) for the trademark with indefinite life and property and equipment, respectively, before the deconsolidation.
The Group also recorded an impairment loss of RMB 49,037,576(USD 7,109,780) for the goodwill related to the business of Urban and
recognized a disposal loss of RMB 855,223 (USD 123,996). All impairment losses of long-lived assets excluding goodwill and disposal
losses are included in other general expenses in the consolidated statements of comprehensive income/(loss).
The Group estimated fair value using the income approach and the market approach. The fair value determined using the income
approach was compared with comparable market data and reconciled, as necessary.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-32
5.    REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregated Revenues
The following tables present our revenues disaggregated by the type of the services:
Years Ended December 31, 
    
2020
    
2021
    
2022
    
2022
RMB
RMB
RMB
USD
Leased and operated hotels revenues
 
227,074,041
391,960,031
338,506,220  
49,078,788
Franchise and managed hotels revenues
 
677,480,818
774,359,348
582,441,077  
84,446,018
Initial franchise fee
 
61,051,369
76,263,574
42,423,951  
6,150,894
Continuing franchise fees
 
616,429,449
698,095,774
540,017,126  
78,295,124
Others
 
25,455,237
39,826,579
15,853,985  
2,298,612
Total
 
930,010,096
1,206,145,958
936,801,282  
135,823,418
Substantially all revenues are generated in the PRC.
Contract Balances
The Group’s payments from customers are based on the billing terms established in contracts. Customer billings are classified as
accounts receivable when the Group’s right to consideration is unconditional. If the right to consideration is conditional on future
performance under the contract, the balance is classified as a contract asset. Our contract assets are insignificant at December 31, 2021
and December 31, 2022.
Payments received in advance of performance under the contract are classified as current or non-current contract liabilities on the
Group’s consolidated balance sheets and are recognized as revenue as the Group performs under the contract.
    
Years Ended December 31, 
    
2021
    
2022
    
2022
RMB
RMB
USD
Advance from customers
 
39,773,738  
18,681,010  
2,708,492
Deferred revenue-current
 
215,147,975  
189,105,747  
27,417,756
Deferred revenue-non current
 
314,472,488  
232,695,351  
33,737,655
Total contract liabilities
 
569,394,201  
440,482,108  
63,863,903

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-33
5.    REVENUE FROM CONTRACTS WITH CUSTOMERS (CONTINUED)
Contract Balances (continued)
The deferred revenue balances above, as of December 31, 2021 and 2022 were comprised of the following:
Years Ended December 31, 
    
2021
    
2022
    
2022
RMB
RMB
USD
Initial fees received from franchisees owners
 
248,406,284  
190,381,636  
27,602,743
Cash received for membership fees and not recognized as revenue
 
186,976,973  
138,656,460  
20,103,297
Cash received for prepaid card and sublease
 
47,604,011  
40,622,136  
5,889,656
Deferred revenue related to the membership program
 
46,633,195  
52,140,866  
7,559,715
Total deferred revenue
 
529,620,463  
421,801,098  
61,155,411
The Group recognized revenues that were previously deferred as contract liabilities of RMB183,736,546 and RMB179,416,343
(USD26,012,925) during the years ended December 31, 2021 and 2022, respectively.
Revenue Allocated to Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which
includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods.
As of December 31, 2022, the Group had RMB190,381,636 (USD27,602,743) of deferred revenues related to initial fees received
from franchisees owners are expected to be recognized as revenues over the remaining contract periods over one to 30 years. The Group
had RMB138,656,460 (USD20,103,297) of deferred revenues related to membership fees that are expected to be recognized as revenues
over the remaining membership life, which is estimated to be one to five years. The Group had RMB52,140,866 (USD7,559,715) of
deferred revenues related to unsatisfied performance obligations under Greentree Reward membership program that will be recognized
as revenues when the points are redeemed, which we estimate will occur over the next two years. The Group also had RMB40,622,136
(USD5,889,656) related to cash received for prepaid card and sublease, which are expected to be recognized as revenues in future
periods over the terms of the related contracts within two years.
The Group did not estimate revenues expected to be recognized related to the Group’s unsatisfied performance for the following:
●
Revenues related to on-going management and franchise service fees, as they are considered sales-based royalty fees.
●
Revenues related to central reservation system usage fees, IT system maintenance fees, and reimbursement for hotel manager
fee, as the related revenues from the satisfaction of these performance obligations is recognized when the Group is entitled to
invoice the amount.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-34
6.    LOANS RECEIVABLE, NET
Loans receivable, net is comprised of the following:
As of December 31, 
    
2021
    
2022
    
2022
RMB
RMB
USD
Loans receivable, current portion
 
  
Franchisees
 
308,016,920
197,473,408
28,630,953
Third parties
 
45,216,904
38,862,429
5,634,523
Less: bad debt provision
 
(105,703,244)
(54,668,667)
(7,926,212)
Total
 
247,530,580
181,667,170
26,339,264
Loans receivable, non-current portion
 
 
 
Franchisees
 
294,150,438  
373,477,244  
54,149,110
Third parties
 
9,000,000  
28,344,271  
4,109,533
Less: bad debt provision
(12,182,758)
(224,649,006)
(32,571,044)
Total
 
290,967,680  
177,172,509  
25,687,599
Loans receivable to franchisees represent loan agreements entered with certain franchisees to finance the renovation of certain
franchised-and-managed hotels with maturity from one month to six years and the interest rate from 4.7% to 9.9% per annum.
Loans receivable to third parties mainly represent loan agreements entered with certain third-party companies to support their daily
operation or bridge loan of mortgage with maturity from one year to three years and the interest rate from 7.9% to 18.0% per annum.
As of December  31, 2021 and 2022, the Group recognized an allowance of RMB117,886,002 and RMB 279,317,673
(USD40,497,256) in relation to loans to third parties and certain franchisees in Other general operating expenses in the consolidated
statements of comprehensive income/(loss).
The following table presents the aging of past-due gross loans receivable as of December 31, 2021 and 2022:
    
    
    
7 to 12
    
    
1 to 3 months 
4 to 6 months 
months past 
Over 1 year
past due
past due
due
past due
Total
RMB
RMB
RMB
RMB
RMB
December 31, 2021
 
42,412,387  
25,028,613  
33,136,695  
39,751,902
140,329,597
    
    
    
7 to 12
    
    
1 to 3 months 
4 to 6 months 
months past 
Over 1 year
past due
past due
due
past due
Total
RMB
RMB
RMB
RMB
RMB
December 31, 2022
 
37,705,971
17,747,676
95,949,547
134,179,464
285,582,658
December 31, 2022 (USD)
 
5,466,852
2,573,171
13,911,377
19,454,193
41,405,593
6.    LOANS RECEIVABLE, NET (CONTINUED)
Movement of allowance for loans receivable for the year ended December 31, 2021 and 2022 are as follows:

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-35
Years Ended December 31,
    
2021
    
2022
    
2022
RMB
    
RMB
    
USD
Balance of the beginning of the year
 
18,000,000
117,886,002
17,091,864
Provision
 
99,886,002
161,431,671
23,405,392
Balance of the end of the year
 
117,886,002
279,317,673
40,497,256
Evaluated for impairment on an individual basis
 
117,886,002
116,852,875
16,942,074
7.    PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:
As of December 31, 
    
2021
    
2022
    
2022
RMB
RMB
USD
Buildings
626,908,935
637,783,560
92,469,924
Leasehold improvements
630,691,571
598,805,361
86,818,616
Furniture, fixtures and equipment
93,440,638
100,499,326
14,571,033
Motor vehicles
3,204,381
2,493,487
361,522
Total
1,354,245,525
1,339,581,734
194,221,095
Less:
Accumulated depreciation
(436,314,189)
(506,440,843)
(73,427,020)
Impairment
—
(19,910,455)
(2,886,745)
917,931,336
813,230,436
117,907,330
Construction in progress
127,424,929
21,541,245
3,123,187
Property and equipment, net
1,045,356,265
834,771,681
121,030,517
Depreciation expense was RMB59,719,535, RMB89,617,316 and RMB104,605,645 (USD15,166,393) for the  years ended
December 31, 2020, 2021 and 2022, respectively.
As of 31 December, 2021 and 2022, two of the Group’s buildings with a net carrying amount of approximately RMB288,313,328
and RMB270,646,005 (USD39,239,982) were pledged to secure general banking facilities granted to the Group, respectively (Note 13).

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-36
8.    INTANGIBLE ASSETS, NET
Intangible assets, net consist of the following:
As of December 31, 
    
2021
    
2022
    
2022
RMB
RMB
USD
Intangible assets with indefinite lives:
 
  
Trademarks
 
443,300,000
—
—
Intangible assets with finite lives:
 
Trademarks
 
41,620,493
41,435,000
6,007,510
Technology
 
4,200,000
4,200,000
608,943
Network rights
 
390,317
210,755
30,557
Purchased software
 
15,429,484
13,574,658
1,968,140
Reacquired rights
 
2,531,418
2,531,418
367,021
Favorable leases
 
42,095,848
—
—
Others
 
435,185
435,185
63,096
Total
 
550,002,745
62,387,016
9,045,267
Less: Accumulated amortization
 
(29,885,266)
(24,275,080)
(3,519,556)
Total.
 
520,117,479
38,111,936
5,525,711
The value of favorable lease agreements is amortized using the straight-line method over the remaining lease term before January 1,
2022. Favorable lease agreements in which the Group acts as a lessee were reclassified to operating lease right-of-use assets on January
1, 2022, upon adoption of ASC 842.
Amortization expense of intangible assets for the years ended December 31, 2020, 2021 and 2022 amounted to RMB6,150,436,
RMB8,493,341 and RMB5,267,881 (USD763,771), respectively.
No impairment losses on intangible assets are recognized for the year ended December 31, 2020 and 2021. The Group recognized
impairment losses of intangible assets with indefinite life and intangible assets with finite lives of RMB12,000,345 (USD1,739,886) and
RMB700,762(USD101,600) respectively for the year ended December 31, 2022(Note 4). As of December 31,2022, there was no
trademark with indefinite life, due to deconsolidation of Argyle and Urban.
The estimated aggregate amortization expense for each of the five succeeding years is as follows:
Year ending December 31, 
    
RMB
    
USD
2023
5,360,169
777,151
2024
 
5,251,853
761,447
2025
 
4,849,872
703,165
2026
 
4,644,938
673,453
2027
 
4,298,162
623,175
Thereafter
 
13,706,942
1,987,320

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-37
9.    LEASES
The Group has operating leases arrangements for their leased and operated hotels.
A summary of supplemental information related to operating leases as of December 31, 2021 and 2022 is as follows:
For the years ended December 31,
    
2022
    
2022
RMB
USD
Operating lease right-of-use assets
1,544,739,494
223,966,174
Operating lease liabilities, current
 
210,388,801  
30,503,509
Operating lease liabilities, non-current
 
1,449,422,906  
210,146,568
Total operating lease liabilities
 
1,659,811,707  
240,650,077
Cash paid for amounts included in the measurement of operating lease liabilities
142,082,493
20,600,025
Right-of-use assets obtained in exchange for operating lease liabilities
 
4,852,371  
703,528
Weighted average remaining lease term (in years)
 
11.59  
  
Weighted average discount rate
 
4.44 %  
  
Lease expense for all the Group’s operating leases for the years ended December 31, 2020, 2021 and 2022 were RMB118,295,183,
RMB235,568,383 and RMB 224,536,299(USD 33,522,387), respectively.
A summary of maturity of operating lease liabilities under the Group’s non-cancelable operating leases as of December 31, 2022 is
as follows:
As of December 31, 2022
RMB
USD
2023
    
282,807,254     
41,003,197
2024
 
197,605,091  
28,650,045
2025
 
192,081,787  
27,849,241
2026
 
186,104,746  
26,982,652
2027
 
167,736,439  
24,319,498
Thereafter
 
1,135,384,672  
164,615,304
Total future lease payments
 
2,161,719,989  
313,419,937
Less: imputed interest
 
501,908,282  
72,769,860
Total operating lease liabilities
 
1,659,811,707  
240,650,077
10.   GOODWILL
The changes in the carrying amount of goodwill for the years ended December 31, 2021 and 2022 were as follows:
For the years ended December 31, 
    
2021
    
2022
    
2022
RMB
RMB
USD
Balance as of January 1
 
100,231,487
120,819,948
17,517,246
Acquisitions
 
20,588,461
—
—
Impairments (Note 4)
—
(91,236,480)
(13,228,046)
Balance as of December 31
 
120,819,948
29,583,468
4,289,200

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-38
11.   INVESTMENTS
Short-term investments
Short-term investments as of December 31, 2021 and 2022 consisted of the following:
As of December 31,
    
2021
    
2022
    
2022
RMB
RMB
USD
Investments in wealth management products
 
147,458,675  
156,031,572  
22,622,451
Time deposits
 
410,000,000  
30,000,000  
4,349,592
Total
 
557,458,675  
186,031,572  
26,972,043
Investments in equity securities with readily determinable fair values
Equity securities with readily determinable fair value represent investments in the equity securities of publicly listed companies, for
which the Group does not have significant influence.
Total unrealized and realized gains and losses of investments in equity securities in current assets for the years ended December 31,
2020, 2021 and 2022 were as follows:
For the years ended December 31,
    
2020
    
2021
    
2022
    
2022
RMB
RMB
RMB
USD
Total net (losses) recognized
 
(27,272,299) 
(9,195,509) 
(2,622,450) 
(380,219)
Less: Net realized gains(losses) on equity securities sold
 
2,314,688  
(452,014) 
11,294,390  
1,637,533
Net unrealized (losses) recognized on equity securities held
 
(29,586,987) 
(8,743,495) 
(13,916,840) 
(2,017,752)
Long-term investments
As at December 31, 2021 and 2022, long-term investments consisted of the following:
As of December 31, 
    
2021
    
2022
    
2022
RMB
RMB
USD
Equity method investments
 
  
Shanghai Wiselong Enterprise Management Co., Ltd.
 
25,424,106
26,118,102
3,786,769
Other
 
10,787,859
8,495,562
1,231,741
Total equity method investments
36,211,965
34,613,664
5,018,510
Equity securities with readily determinable fair values
 
39,852,428
27,408,447
3,973,851
Equity securities without readily determinable fair values
 
6,233,255
9,826,143
1,424,657
Available-for-sale debt securities
 
106,493,137
103,706,206
15,035,986
Total
 
188,790,785
175,554,460
25,453,004

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-39
11.    INVESTMENTS (CONTINUED)
Equity securities with readily determinable fair values
Total unrealized and realized gains and losses of equity securities with readily determinable fair values included in long-term
investments for the years ended December 31, 2020, 2021 and 2022 were as follows:
For the years ended December 31,
    
2020
    
2021
    
2022
    
2022
RMB
RMB
RMB
USD
Total net (losses) gains recognized
 
(4,501,222) 
15,623,340  
(15,126,672) 
(2,193,161)
Less: net realized gains on equity securities sold
 
4,746,032  
14,058,448  
—  
—
Net unrealized (losses) recognized on equity securities held
 
(9,247,254) 
1,564,892 
(15,126,672) 
(2,193,161)
Equity securities without readily determinable fair values
The equity investments without readily determinable fair value held as of December 31, 2021 and 2022 were as follows:
As of December 31,
    
2021
    
2022
    
2022
RMB
RMB
USD
Initial cost
 
3,523,212  
51,523,212  
7,470,164
Cumulative unrealized gains
 
2,710,043  
302,931  
43,921
Cumulative unrealized losses (including impairment)
 
—  
(42,000,000) 
(6,089,428)
Total carrying value
 
6,233,255  
9,826,143  
1,424,657
Available-for-sale debt securities
In April 2017, the Group acquired a 30% interest in Yibon for cash consideration of RMB103,701,474 in form of capital injection
into the target company. The terms of investment in 30% equity interest in the ordinary shares of Yibon includes a contingent redemption
clause if certain specified criteria are not met. As a result, the investment was accounted for as a cost method investment as the shares are
not in-substance common stock prior to January 1, 2019. Along with the adoption of ASU 2016-01, the Group accounted it as equity
securities without readily determinable fair values.
As of December 31, 2020, the performance period had elapsed and the criterion had been determined to be not met, therefore the
Group has the option to require Yibon to redeem the investment at the Group’s discretion. Therefore, the Group reclassified it to
available-for-sale debt security and recorded it at its fair value.
The holders of 70% of equity interest in Yibon had the right to exchange their equity interest in Yibon into the Company’s shares
within a certain period after Yibon delivered an audited consolidated financial report for the year of 2019 in accordance with a formula
using Yibon’s net profit achieved in the year of 2019 as calculation basis. Yibon recorded a net loss in 2019, as such, those holders were
unable to exchange their equity interests in Yibon for the Company’s shares. No impairment were recorded for this investments during
any of other presented periods.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-40
11.    INVESTMENTS (CONTINUED)
Short-term and long-term debt securities as of December 31, 2021 and 2022 were shown as below:
As of December 31, 2021
Gross
Gross
unrecognized
Gross
Gross
Amortized
unrecognized
holding
unrealized
unrealized
cost
holding gains
losses
gains
losses
Fair value
    
RMB
    
RMB
    
RMB
    
RMB
    
RMB
    
RMB
Investments in wealth management products
 
147,458,675  
—  
—  
—  
—  
147,458,675
Available-for-sale debt securities of Yibon
 
103,701,474  
2,791,663  
—  
—  
—  
106,493,137
As of December 31, 2022
Gross
Gross
unrecognized
Gross
Gross
Amortized
unrecognized
holding
unrealized
unrealized
cost
holding gains
losses
gains
losses
Fair value
    
RMB
    
RMB
    
RMB
    
RMB
    
RMB
    
RMB
Investments in wealth management products
 
156,031,572  
—  
—  
—  
—  
156,031,572
Available-for-sale debt securities of Yibon
 
103,701,474  
2,791,663  
(2,786,931) 
—  
—  
103,706,206
12.   OTHER ASSETS
As of December 31, 
    
2021
    
2022
    
2022
RMB
RMB
USD
Current
Receivable from on-line payment platforms
53,983,324
27,079,159
3,926,109
Interest receivable
49,347,369
4,944,657
716,908
Deposits
11,168,379
7,974,326
1,156,169
Advance to suppliers
5,206,428
2,724,889
395,071
VAT recoverable
5,009,469
5,625,956
815,687
Others
18,022,194
44,502,363
6,452,237
Total
142,737,163
92,851,350
13,462,181
Non-current
Acquisition deposits
    
6,650,200
804,329
116,617
Rental deposit
 
56,962,580
40,016,200
5,801,804
Interest receivable
 
5,737,675
8,048,083
1,166,862
Purchase and rental deposits for buildings
197,723,649
192,305,859
27,881,729
Returnable consideration from the acquisition of Urban Hotel Group
 
5,385,583
—
—
VAT recoverable
10,774,251
11,101,867
1,609,619
Others
 
46,132,402
34,636,103
5,021,763
Less: provision
—
(192,305,859)
(27,881,729)
Total
 
329,366,340
94,606,582
13,716,665

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-41
Purchase and rental deposits for certain real estate properties paid to a third party were full provided due to the financial crisis of the
counterparty. The provision of RMB192,305,859 (US$27,881,279) was recorded in “Other general expense” of the consolidated
statements of comprehensive loss for the year ended December 31, 2022.
13.   BANK LOANS
Short-term bank loans
Short-term bank loans consisted of RMB denominated borrowings from financial institutions in the PRC that are repayable within
one year. The weighted average interest rates for the outstanding short-term bank loans as of December 31, 2021 and 2022 were 4.42%
and 4.10%, respectively.
Long-term bank loans
In December 2021, the Group entered into a secured loan agreement with Shanghai Pudong Development Bank, pursuant to which
the Group was entitled to borrow a RMB denominated loan of RMB152,000,000 for interest rate at a fixed annual interest rate of 4% and
maturity date on February 17, 2023. The Group collateralize such borrowing with short-term investments and long-term time deposits of
RMB30,000,000 and RMB130,000,000, respectively.
In December 2021, pursuant to the secured loan agreement with Bank of DaLian, the Group borrowed a secured RMB denominated
loan of RMB200,000,000 for interest rate at a fixed annual interest rate of 5% and maturity date on December 27, 2024. The repayment
of the loan was guaranteed by two buildings owned by the Group, which have a carrying amount of RMB270,646,005(USD39,239,982)
as of December 31, 2022.
As of December 31, 2022, aggregate loan principal payments on long-term borrowings are due according to the following schedule:
Year ending December 31,
    
RMB
    
USD
2023
141,800,000
20,559,067
2024
160,000,000
23,197,819
Total
301,800,000
43,756,886
14.   ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
As of December 31, 
    
2021
    
2022
2022
RMB
RMB
    
USD
Payable to franchisees
    
155,853,992
204,789,935
29,691,750
Business taxes and related tax surcharge
 
111,076,878
115,813,719
16,791,411
Accrued rental
 
27,957,242
—
—
Construction payable
 
13,888,585
15,587,528
2,259,979
Deposits payable
17,269,154
19,652,737
2,849,379
Payable for business combination and asset acquisitions
15,342,675
13,342,676
1,934,506
Accrued utilities
 
1,177,631
3,355,489
486,500
Others
 
38,715,905
27,512,224
3,988,897
Total
381,282,062
400,054,308
58,002,422
15.   OTHER LONG-TERM LIABILITIES
As of December  31, 2021 and 2022, other long-term liabilities are mainly comprised of deposits from franchisees of
RMB118,803,438 and RMB114,874,876 (USD16,655,291), respectively.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-42
16.   ORDINARY SHARES
The Group’s Class A and Class B ordinary shares are identical in all respects except for voting and conversion rights. Each Class B
ordinary share is convertible into one Class A ordinary share at any time by the holder thereof, and Class A ordinary shares are not
convertible into Class B ordinary shares under any circumstances. On all matters upon which the holders are entitled to vote, the Class A
shares and Class B shares then outstanding shall constitute 39.3% and 60.7% of the total voting power of the issued and outstanding
shares of the Group, respectively.
17.   HOTEL OPERATING COSTS
Hotel operating costs include all direct costs incurred in the operation of the leased-and-operated hotels and cost of providing
franchise services and consist of the following:
Year ended December 31, 
    
2020
    
2021
    
2022
    
2022
RMB
RMB
RMB
USD
Rental
118,295,183
235,568,383
224,536,299
32,554,703
Utilities
15,372,385
25,782,913
27,877,272
4,041,825
Personnel cost
46,941,757
82,114,394
74,280,671
10,769,685
Depreciation and amortization
53,850,494
80,575,644
92,797,895
13,454,430
Consumable, food and beverage
43,257,796
69,495,702
41,281,830
5,985,302
Costs of hotel manager of franchised-and-managed hotels
91,664,745
114,779,305
107,852,170
15,637,095
Other costs of franchised-and-managed hotels
22,985,917
26,123,578
14,340,427
2,079,166
Others
9,291,029
16,936,986
11,052,758
1,602,500
Total
401,659,306
651,376,905
594,019,322
86,124,706
18.   SHARE BASED COMPENSATION
2018 Share Incentive Plan
In January 2018, the Group adopted the 2018 Share Incentive Plan which allows the Group to offer incentive awards to employees,
directors and consultants (the “Participants”). Under the 2018 Share Incentive Plan, the Group may issue incentive awards to the
Participants to purchase not more than 9,000,000 Class A ordinary shares. The incentive awards granted under the Share Incentive Plans
typically have a maximum life of six years and vest in typical ways as vest ratably over the following four  years starting after the
first/second/third anniversary of the stated vesting commencement date.
Share-based compensation expense of RMB232,558 and RMB2,464,763 was recognized in general and administrative expenses for
the years ended December 31, 2020 and 2021. Share-based compensation expense of RMB62,356(USD9,041) was reversed in general
and administrative expenses due to forfeitures during the year ended December 31, 2022. During the year ended December 31, 2020,
2021 and 2022, cash used to settle the related share-based compensation is nil.
For options granted during the years ended December 31, 2021 and 2022, the weighted-average grant date fair value for options
granted was USD2.42 and USD1.34, respectively computed using the binomial option pricing model. The binomial model requires the
input of subjective assumptions including the expected stock price volatility and the expected price multiple at which employees are
likely to exercise stock options. The Group uses historical data to estimate forfeiture rate. Expected volatilities are based on the average
volatility of the Group and comparable companies. The risk-free rate for periods within the contractual life of the option is based on the
U.S. Treasury yield curve in effect at the time of grant.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-43
18.   SHARE BASED COMPENSATION (CONTINUED)
The fair value of share options was estimated using the following significant assumptions:
     Granted in 2021     
Granted in 2022
 
Risk-free interest rate
 
0.92 %  
1.35 %
Volatility
 
40 %  
39 %
Dividend yield
 
2.5 %
2.5 %
Life of option
 
6 years  
6 years
2018 Share Incentive Plan (continued)
The aggregate grant date fair value of the outstanding options was determined to be RMB35,828,331, RMB34,994,421 and
RMB35,706,209 (USD5,176,914) for the years ended December  31, 2020, 2021 and 2022, respectively and such amount shall be
recognized as compensation expenses using the accelerate method for all employee share options granted. The total fair value of share
options vested during the years ended December 31, 2020, 2021 and 2022 were RMB8,610,259, RMB8,319,569 and RMB8,998,734
(USD1,304,694).
As of December  31, 2022, there was RMB39,537 (USD5,732) in total unrecognized compensation expense related to unvested
options, which is expected to be recognized over a weighted-average period of 0.42 years.
The following table summarized the Group’s share option activity under the option plans:
    
    
    
Weighted
    
Weighted 
Average 
Average 
Remaining  
Aggregate 
Number of 
Exercise
Contractual
Intrinsic 
Options
Price
Life
Value
USD
Years
USD
Share options outstanding at December 31, 2021
992,500
12.27
2.14
—
Granted
10,000
14.00
6
—
Exercised
—
—
—
—
Forfeited
(62,000)
12.84
—
—
Expired
—
—
—
—
Share options outstanding at December 31, 2022
940,500
12.26
1.18
—
Vested and expected to vest at December 31, 2022
940,500
12.26
1.18
—
Exercisable as of December 31, 2022
932,250
12.22
1.18
—
19.   INCOME TAXES
Samoa
Under the current laws of Samoa, GreenTree Samoa is not subject to tax on income or capital gain. Upon payment of dividends by
the Company to its shareholders, no Samoa withholding tax will be imposed.
Cayman Island
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Upon payment of
dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-44
19.   INCOME TAXES (CONTINUED)
Hong Kong
GreenTree Hotels (Hong Kong), Limited is subject to Hong Kong profit tax at a rate of 16.5% in the years ended December 31,
2020, 2021 and 2022 and it may be exempted from income tax on its foreign-derived income. No Hong Kong profit tax has been
provided as the Group has not had assessable profit that was earned in or derived from Hong Kong during the years presented. There are
no withholding taxes in Hong Kong on remittance of dividends.
PRC
On March 16, 2007, the PRC government promulgated the Law of the People’s Republic of China on Enterprise Income Tax (“New
EIT Law”), which was effective from January 1, 2008. Under the New EIT Law, domestically-owned enterprises and foreign-invested
enterprises are subject to a statutory tax rate of 25%. Enterprises qualified as “High New Technology Enterprises (“HNTEs”) enjoy a
preferential income tax rate of 15%. Dividends, interest, rent or royalties and proceeds from any such assets located in the PRC (after
deducting the net value of such assets) shall be subject to a 10% withholding tax.
Shanghai Evergreen qualified as an HNTE in November 2017 and was entitled to a preferential income tax rate of 15% from 2017 to
2019. Shanghai Evergreen reapplied for HNTE in 2020 and was successful in obtaining the HNTE certificate. It is entitled to the
preferential income tax rate of 15% from 2020 to 2022.
Shanghai Sipei qualified as an HNTE in 2020 and is entitled to a preferential income tax rate of 15% during 2020 to 2022.
The current and deferred components of income tax (expense) benefit appearing in the consolidated statements of comprehensive
income/(loss) are as follows:
Year ended December 31, 
    
2020
    
2021
    
2022
    
2022
RMB
RMB
RMB
USD
Current tax
122,931,256
105,353,756
80,209,774
11,629,324
Deferred tax
(12,472,054)
3,535,126
(125,802,192)
(18,239,603)
Total
110,459,202
108,888,882
(45,592,418)
(6,610,279)
Reconciliation between the effective income tax rate and the PRC statutory income tax rate is as follows:
Years ended December 31, 
 
    
2020
    
2021
    
2022
 
PRC statutory tax rate
25 %  
25 %  
25 %
Withholding tax on the PRC earnings distribution
— %  
10 %  
9 %
Effect of international rate difference
1 %  
1 %  
(10)%
Effect of preferential tax rate
— %  
(7)%  
1 %
Tax effect of expenses that are not deductible in determining taxable profit
4 %  
6 %  
(7)%
Valuation Allowance
1 %
14 %
(8)%
Effective tax rate
31 %  
49 %  
10 %

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-45
19.   INCOME TAXES (CONTINUED)
PRC (continued)
The principal components of the Group’s deferred income tax assets and liabilities as of December 31, 2021 and 2022 are as follows:
As of December 31, 
    
2021
    
2022
    
2022
RMB
RMB
USD
Deferred tax assets:
Net loss carryforward
53,089,828
64,191,537
9,306,898
Deferred revenue
115,049,834
91,552,823
13,273,912
Deferred rent
17,692,412
—
—
Lease liability
—
414,797,817
60,140,030
Bad debt expenses
30,328,801
79,570,368
11,536,619
Accrued expenses
17,687,519
16,350,750
2,370,636
Unrealized losses from equity securities
7,534,182
717,944
104,092
Impairment of Long-lived assets and other assets
—
53,054,078
7,692,118
Valuation allowance
(59,426,713)
(76,326,389)
(11,066,286)
Total deferred tax assets
181,955,863
643,908,928
93,358,019
Deferred tax liabilities:
Depreciation of property and equipment
(6,099,754)
(7,765,478)
(1,125,888)
Unrealized gains from equity securities
(880,803)
(5,360,418)
(777,188)
Intangible assets arising from acquisition
(176,681,292)
(52,570,078)
(7,621,945)
Withholding tax on PRC earnings to be distributed
(64,929,920)
(20,730,212)
(3,005,598)
Right-of-use assets
—
(386,025,806)
(55,968,481)
Total deferred tax liabilities
(248,591,769)
(472,451,992)
(68,499,100)
Net deferred tax (liabilities) assets
(66,635,906)
171,456,936
24,858,919
The Group offset deferred tax liabilities and assets pertaining to a particular tax-paying component of the Group within a particular
jurisdiction.
The Group evaluates the potential realization of deferred tax assets on an entity-by-entity basis. As of December 31, 2022,
management recorded a valuation allowance against the amount of deferred tax assets that it determines is not more-likely-than-not to be
realized. As of December 31, 2022, the Group had tax losses carryforwards of RMB 256,766,146 (USD 37,227,592), mainly deriving
from the entities in the PRC. The tax losses in the PRC can be carried forward for five years to offset future taxable profit and which will
expire between 2022 and 2026 if not utilized.
The EIT law also imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise (“FIE”) to its
immediate holding company outside of China, if such immediate holding company is considered as a non-resident enterprise without any
establishment or place within China or if the received dividends have no connection with the establishment or place of such immediate
holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that
provides for a different withholding arrangement. The cumulated undistributed earnings of the Group’s PRC subsidiaries the Group
intends to indefinitely reinvested were RMB 445,148,415 (USD64,540,453) as of December 31, 2022. As of December 31, 2022, the
related PRC withholding tax liability unrecognized was RMB44,514,842 (USD6,454,045).

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-46
19.   INCOME TAXES (CONTINUED)
PRC (continued)
The Group made its assessment of the level of authority for each of its uncertain tax positions based on the technical merits, and has
measured the unrecognized tax benefits associated with the tax positions. It is possible that the amount of uncertain tax benefits will
change in the next 12 months, however, an estimate of the range of the possible outcomes cannot be made at this time. RMB246,635,312
(USD 35,758,759) of the uncertain tax positions, if ultimately recognized, would affect the effective tax rate. A reconciliation of
unrecognized tax benefits is as follows:
Unrecognized tax benefits — January 1, 2021
    
202,915,367
Increases — tax positions in the current period
74,057,733
Decreases — tax positions in prior period
(38,114,470)
Unrecognized tax benefits — December 31, 2021
238,858,630
Unrecognized tax benefits — January 1, 2022
238,858,630
Increases — tax positions in the current period
25,680,473
Decreases — tax positions in prior period
(17,903,791)
Unrecognized tax benefits — December 31, 2022
246,635,312
In the years ended December 31, 2022, the Company recorded interest expense of RMB39,943,119 (USD 5,791,208). In the years
ended December 31, 2022, the Company reversed interest expense of RMB26,980,981 (USD3,911,875). As of December 31, 2022, the
accumulated interest expense and penalty recorded by the Group was RMB102,923,789 (USD14,922,547) and nil, respectively.
The Group’s PRC subsidiaries are subject to examination by the PRC tax authorities from 2017 through 2022 on non-transfer pricing
matters, and from 2012 through 2022 on transfer pricing matters.
20.   MAINLAND CHINA CONTRIBUTION PLAN AND PROFIT APPROPRIATION
Full time employees of the Group in the PRC participate in a government-mandated multi-employer defined contribution plan
pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits
are provided to employees. PRC labor regulations require the Group to accrue for these benefits based on a certain percentage of the
employees’ salaries, subject to certain ceilings. The total contribution for such employee benefits were RMB25,666,575,
RMB36,617,173 and RMB45,051,494 (USD6,531,853) for the years ended December 31, 2020, 2021 and 2022, respectively. The Group
has no ongoing obligation to its employees subsequent to its contributions to the PRC plan.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-47
21.   STATUTORY RESERVES AND RESTRICTED NET ASSETS
In accordance with the PRC Regulations on Enterprises with Foreign Investment, an enterprise established in the PRC with foreign
investment is required to make appropriations to certain statutory reserves, namely a general reserve fund, an enterprise expansion fund,
a staff welfare fund and a bonus fund, all of which are appropriated from net profit as reported in its PRC statutory accounts. A foreign
invested enterprise is required to allocate at least 10% of its annual after-tax profits to a general reserve fund until such fund has reached
50% of its respective registered capital. Appropriations to the enterprise expansion fund and staff welfare and bonus funds are at the
discretion of the board of directors for the foreign invested enterprises. For other subsidiaries incorporated in the PRC, the general
reserve fund was appropriated based on 10% of net profits as reported in each subsidiary’s PRC statutory accounts. General reserve and
statutory surplus funds are restricted to set-off against losses, expansion of production and operation and increasing registered capital of
the respective company. Staff welfare and bonus fund and statutory public welfare funds are restricted to capital expenditures for the
collective welfare of employees. The reserves are not allowed to be transferred to the Company in terms of cash dividends, loans or
advances, nor are they allowed for distribution except under liquidation. As of December 31, 2021 and 2022, the PRC statutory reserve
funds amounted to RMB77,453,118 and RMB 78,286,662 (USD 11,350,499), respectively.
In addition, under PRC laws and regulations, the Group’s PRC subsidiaries are restricted in their ability to transfer their net assets to
the Company in the form of dividend payments, loans or advances. Amounts of net assets restricted include paid up capital and statutory
reserve funds of the Group’s PRC totaling RMB936,799,320 and RMB898,596,672 (USD130,284,271) as of December 31, 2021 and
2022, respectively.
Furthermore, cash transfers from the Group’s PRC subsidiaries to the Group’s subsidiaries outside of the PRC are subject to the PRC
government control of currency conversion. Shortages in the availability of foreign currency may restrict the ability of the Group’s PRC
subsidiaries to remit sufficient foreign currency to pay dividends or other payments to the Company, or otherwise satisfy their foreign
currency denominated obligations.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-48
22.   RELATED PARTY TRANSACTIONS AND BALANCES
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operational decisions. The related parties that had transactions or balances with the
Group in 2020, 2021 and 2022 consisted of:
Related Party
     Nature of the party
     Relationship with the Group
Alex S. Xu
 
Individual
 
Founder and CEO
Hui Xu
 
Individual
 
Brother of Alex S. Xu
Yan Zhang
 
Individual
 
Executive officer for catering management
entities controlled by GTI
Wen Qi
 
Individual
 
Quality Control Manager
GTI
 
Investment holding
 
Shareholder of the Group, controlled by
Alex S. Xu
Shanghai Aotao Industrial Co., Ltd, together with its subsidiaries and
VIE (“Aotao”)
 
Catering management
 
Controlled by GTI
Getao Industrial (HK) Limited (“Getao”)
Catering management
Controlled by GTI
Da Niang Dumpling Catering Group Co., Ltd, together with its
subsidiaries (“Da Niang Group”)
 
Catering management
 
Controlled by GTI
Beifu HongKong Indutrial Co,Limited (“Beifu HK”)
Catering management
Controlled by GTI
Shanghai JYHM Restaurant Management Co., Ltd. (“JYHM”)
 
Catering management
 
Controlled by GTI
Bellagio Restaurant Management Group (“Bellagio”)
Catering management
Controlled by GTI
Napa Infinity Winery (Shanghai) Inc. (“Napa”)
 
Wine distributor
 
Controlled by Hui Xu
Yibon
 
Hotel management
 
Equity investee of the Group
Shanxi Hanyuanbaili Hotel Management Co., Ltd. (“Hanyuan”) *
 
Hotel management
Equity investee of the Group
Woyaojiu Information Technology (Shanghai) Co.,Ltd. (“Woyaojiu”)
Catering management
Controlled by Hui Xu
Shanxi Yueyuanbaili Hotel Management Co., Ltd. (“Yueyuan”)
Hotel management
Equity investee of the Group
Apex(Weihai) Industrial Co., Ltd (“Apex”)
Construction
Controlled by Hui Xu
*
Hanyuan was a subsidiary of the Group before December 2021, when the Group disposed 5% of the equity interests of Hanyuan and
Hanyuan became equity investee of the Group.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-49
22.   RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
(a)   Related party balances
Due from related parties:
As of December 31, 
    
2021
    
2022
    
2022
RMB
RMB
USD
Current:
GTI
206,256,382
326,440,000
47,329,351
Aotao
65,206,135
65,206,135
9,454,000
Beifu HK
26,127,660
28,278,520
4,100,000
Yibon
8,330,198
7,039,315
1,020,605
Hanyuan
3,406,100
6,643,508
963,218
Napa
500,000
587,246
85,143
JYHM
481,227
1,739,578
252,215
Getao
112,158
121,391
17,600
Yueyuan
—
608,394
88,209
Da Niang Group
—
500,184
72,520
Woyaojiu
—
1,000
145
Total
310,419,860
437,165,271
63,383,006
On May 16, 2022, GTI has entered in an agreement with GHG to settle the amounts due from GTI, Aotao and Beifu HK with 100%
equity interests of Da Niang Dumplings business and 83.9% equity interests of Bellagio Café business. The transaction was completed in
March 2023 (Note 26).
Amounts due from Yibon mainly comprised of a loan repayable on demand with an interest rate of 6% per annum with pledge of
one Yibon’s leased-and-operated hotel. The remaining current amounts represented the receivables arising from the ordinary course of
business with related parties.
Noncurrent amounts due from related parties as of December 31, 2022 comprised of RMB110,000,000 (USD15,948,501)
prepayments made by the Group to Apex to acquire buildings for hotel businesses development and a loan with a principal of
RMB2,360,000 (USD342,168) receivable from Wen Qi with an interest rate of 7.9% per annum maturing in July 2024.
Due to related parties:
As of December 31, 
    
2021
    
2022
    
2022
RMB
RMB
USD
Current:
Yibon
6,602,643
7,238,237
1,049,446
Aotao
—
5,550,000
804,674
Napa
2,868,685
536,857
77,837
Da Niang Group
31,307
459,868
66,675
JYHM
27,992
27,992
4,058
9,530,627
13,812,954
2,002,690
Amount due to Yibon comprised of receipts of hotel reservation fees on behalf of Yibon. Amount due to Aotao comprised of
payables for advertising services provided by Aotao. Amount due to Napa comprised of the payable of goods purchased from Napa.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-50
22.   RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
(b)   Related party transactions
During the years ended December 31, 2020, 2021 and 2022, related party transactions consisted of the following:
Year ended December 31,
    
2020
    
2021
    
2022
    
2022
   
RMB
   
RMB
   
RMB
   
USD
Loan to GTI
—
(206,256,382)
(162,490,000)
(23,558,835)
Repayment of loan from GTI
8,424,629
—
42,305,000
6,133,648
Repayment of loan from Aotao
499,421,550
121,000,000
—
—
Loan to Aotao
(479,356,500)
(186,051,400)
—
—
Advertising service from Aotao
(3,920,000)
(6,473,400)
(5,550,000)
(804,674)
Interest income from Aotao
2,316,856
—
—
—
Franchise management fee to Aotao
(41,867)
(49,648)
—
—
Purchase from Napa
(2,059,566)
(2,547,178)
(413,690)
(59,979)
Loan to Hanyuan
—
(3,406,100)
(3,237,408)
(469,380)
Franchised revenue from Yibon
852,287
1,251,888
1,285,068
186,317
Repayment of loan from Yibon
—
3,750,000
1,250,000
181,233
Interest income from Yibon
18,667,117
544,352
12,333
1,788
Loan to Yibon
(9,000,000)
(3,000,000)
—
—
Loan to Wen Qi
—
—
(2,360,000)
(342,168)
Service purchased from JYHM
(40,000)
(667,751)
(20,754)
(3,009)
Sublease revenue from JYHM
284,179
261,392
47,704
6,916
Loan to Yueyuan
—
—
(608,394)
(88,209)
Service purchased form Bellagio
—
(367,804)
(204,087)
(29,590)
Loan to Beifu HK
—
(169,511,160)
—
—
Repayment of loan from Getao on behalf of Beifu HK
—
143,383,500
—
—
Loan to Da Niang Group
(40,000,000)
(39,800,000)
—
—
Repayment of loan from Da Niang Group
40,000,000
39,800,000
—
—
Interest income from Da Niang Group
352,882
—
—
—
Service purchased from Da Niang Group
(724,045)
(221,389)
—
—
Sublease revenue from Da Niang Group
36,000
27,000
—
—

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-51
23.   COMMITMENTS AND CONTINGENCIES
Litigation and contingencies
The Company and its operations from time to time are, and in the future may be, parties to or targets of lawsuits, claims,
investigations, and proceedings, including but not limited to non-compliance respect to licenses and permits, franchise agreements and
lease contracts, which are handled and defended in the ordinary course of business. The Group may be unable to estimate the reasonably
possible loss or a range of reasonably possible losses until developments in such matters have provided sufficient information to support
an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and
investigation of factual allegations, rulings by the court on motions or appeals, or the progress of settlement negotiations. The Company
accrues a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated.
When a single amount cannot be reasonably estimated but the cost can be estimated within a range, the Company accrues the minimum
amount. The Company expenses legal costs, including those expected to be incurred in connection with a loss contingency, as incurred.
24.   EARNINGS (LOSS) PER SHARE
Basic and diluted earnings (Loss) per share for each of the years presented is calculated as follows:
Year Ended December 31, 
    
2020
    
2021
    
2022
    
2022
RMB
    
RMB
    
RMB
    
USD
Numerator:
  
  
  
  
Net income(loss) used in calculating earnings per share-basic
and diluted
261,344,391
117,438,250
(382,216,959)
(55,416,249)
Denominator:
 
Weighted average number of Class A ordinary shares
outstanding used in calculating basic and diluted
earnings(loss) per share
 
68,286,954
68,286,954
68,201,056
68,201,056
Weighted average number of Class B ordinary shares
outstanding used in calculating basic and diluted
earnings(loss) per share
 
34,762,909
34,762,909
34,762,909
34,762,909
Allocation of undistributed earnings(loss) — basic and diluted:  
To Class A Shares
 
173,182,301
77,821,553
(253,172,070)
(36,706,500)
To Class B Shares
 
88,162,090
39,616,697
(129,044,888)
(18,709,750)
Basic and diluted earnings(loss) per share:
 
To Class A Shares
 
2.54
1.14
(3.71)
(0.54)
To Class B Shares
 
2.54
1.14
(3.71)
(0.54)
In November 2022, the Company disposed Urban in exchange for cash considerations and 870,908 Class A ordinary shares of the
Company (Note 4). These shares were excluded in the computation of basic and diluted earnings per shares for the year ended December
31, 2022 since the date of deconsolidation of Urban. The shares were received in March 2023.
The Group did not include share options in the computation of diluted earnings per share for the years ended December 31, 2020,
2021 and 2022 because those share options were anti-dilutive for earnings(loss) per share.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-52
25.   OTHER COMPREHENSIVE INCOME/( LOSS)
The changes in accumulated other comprehensive income by component, net of tax, were as follows:
Unrealized
Foreign
gains(losses)
currency
on available-
translation
for-sale
    
adjustments
     investments     
Total
 
RMB
 
RMB
 
RMB
Balance at December 31,2019
 
65,300,854  
—  
65,300,854
Net current-period other comprehensive loss
 
(19,714,207) 
—  
(19,714,207)
Balance at December 31,2020
 
45,586,647  
—  
45,586,647
Net current-period other comprehensive (loss) income
 
(6,497,403) 
2,791,663  
(3,705,740)
Balance at December 31,2021
 
39,089,244  
2,791,663  
41,880,907
Net current-period other comprehensive loss
 
(11,361,872) 
(2,786,931) 
(14,148,803)
Balance at December 31,2022
 
27,727,372  
4,732  
27,732,104
Balance at December 31, 2022 (USD)
 
4,020,091  
685  
4,020,776
26.   SUBSEQUENT EVENTS
On March 29, 2023, the Company closed and completed its previously announced acquisition (the “Acquisition”) of Da Niang
Dumplings and Bellagio, two leading restaurant chain businesses in China (collectively, the “Target Businesses”), from GTI,
contemplated by the definitive agreement entered into by the parties (the “Agreement”).  As the Group and the Target Businesses are
under the common control of GTI before and after the acquisition, the acquisition will be accounted as a common control transaction in a
manner similar to the pooling-of-interests method.

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-53
27.   PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
Condensed balance sheets
As of December 31, 
    
2021
    
2022
    
2022
RMB
RMB
USD
ASSETS
 
   
   
  
Current assets
 
   
   
  
Cash and cash equivalents
 
22,609,979
15,788,863
2,289,170
Investments in equity securities
 
59,114,452
3,094,133
448,607
Amounts due from subsidiaries
 
113,057,771
122,364,821
17,741,232
Amounts due from a related party
 
202,502,545
348,019,981
50,458,154
Total current assets
 
397,284,747
489,267,798
70,937,163
Non-current assets:
 
Investments in subsidiaries
 
1,977,459,895
1,635,636,043
237,144,935
Investments in equity securities
39,852,428
33,408,446
4,843,769
TOTAL ASSETS
 
2,414,597,070
2,158,312,287
312,925,867
LIABILITIES AND EQUITY
 
Current liabilities:
 
Dividends payable
 
40,999,458
—
—
Long -term bank loans, current portion
30,200,000
121,800,000
17,659,340
Amounts due to subsidiaries
 
350,308,050
592,226,352
85,864,750
Total current liabilities
421,507,508
714,026,352
103,524,090
Non-current liabilities:
Long-term bank loans, non-current portion
121,800,000
—
—
Other long-term liabilities
 
13,604,451
—
—
Total liabilities
 
556,911,959
714,026,352
103,524,090
Shareholders’ Equity:
 
   
   
  
Class A ordinary shares (USD0.50 par value per share; 400,000,000 and
400,000,000 shares authorized as of December 31, 2021 and 2022; 68,286,954 and
68,201,056 shares issued and outstanding as of December 31, 2021 and 2022,
respectively)
 
222,587,070
222,587,070
32,272,092
Class B ordinary shares (USD0.50 par value per share; 100,000,000 and
100,000,000 shares authorized as of December 31, 2021 and 2022; 34,762,909 and
34,762,909 shares issued and outstanding as of December 31, 2021 and 2022,
respectively)
 
115,534,210
115,534,210
16,750,886
Treasury stock
—
(16,971,057)
(2,460,572)
Additional paid-in capital
 
1,151,384,306
1,151,321,950
166,925,992
Retained earnings / (Accumulated losses)
 
326,298,618
(55,918,342)
(8,107,397)
Accumulated other comprehensive income
 
41,880,907
27,732,104
4,020,776
Total Shareholders’ Equity
 
1,857,685,111
1,444,285,935
209,401,777
TOTAL LIABILITIES AND EQUITY
 
2,414,597,070
2,158,312,287
312,925,867

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-54
27.   PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (CONTINUED)
Condensed statements of operations
Year Ended December 31, 
    
2020
    
2021
    
2022
    
2022
RMB
RMB
RMB
USD
General and administrative expenses
(9,967,834)
(18,917,120)
(6,740,255)
(977,245)
Other general expense
—
—
(13,944,926)
(2,021,824)
Interest income
8,173
173,316
1,924
279
Interest expense
—
—
(5,192,054)
(752,777)
Other income
—
—
22,765,816
3,300,733
(Losses) Gains on investments in equity securities
(11,392,623)
11,519,174
(76,105,482)
(11,034,258)
Share of profit (losses) in subsidiaries, net (Note a)
282,696,675
124,662,880
(303,001,982)
(43,931,158)
Net income(losses)
261,344,391
117,438,250
(382,216,959)
(55,416,250)
Other comprehensive losses, net of tax
-   Foreign currency translation adjustments
(19,714,207)
(6,497,403)
(11,361,872)
(1,647,317)
-   Unrealized gains (losses) on available-for-sale investments
—
2,791,663
(2,786,931)
(404,067)
Comprehensive income /(loss)
241,630,184
113,732,510
(396,365,762)
(57,467,634)

Table of Contents
GREENTREE HOSPITALITY GROUP LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-55
27.   PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (CONTINUED)
Condensed statements of cash flows
Year Ended December 31, 
    
2020
    
2021
    
2022
    
2022
    
RMB
    
RMB
    
RMB
USD
Net cash provided by (used in) operating activities
 
231,204,774
(16,338,658)
222,680,208
32,285,596
Net cash used in investing activities
 
(65,670,760)
(113,026,343)
(156,276,810)
(22,658,008)
Net cash used in financing activities
 
—
(43,683,098)
(71,199,458)
(10,322,953)
Effect of exchange rate changes on cash and cash equivalents and
restricted cash
 
5,679,523
2,306,901
(2,025,056)
(293,604)
Net increase (decrease) in cash and cash equivalents and restricted
cash
 
171,213,537
(170,741,198)
(6,821,116)
(988,969)
Cash and cash equivalents and restricted cash at beginning of the year 
22,137,640
193,351,177
22,609,979
3,278,139
Cash and cash equivalents and restricted cash at end of the year
 
193,351,177
22,609,979
15,788,863
2,289,170
(a) Basis of presentation
In the Company-only financial statements, the Company’s investment in subsidiaries is stated at cost plus equity in undistributed
earnings of subsidiaries since inception.
The Company records its investment in its subsidiary under the equity method of accounting as prescribed in ASC 323-10
Investment-Equity Method and Joint Ventures, such investment is presented on the balance sheet as “Investment in subsidiaries” and
share of the subsidiaries’ profit or loss as “Equity in profit of subsidiaries” on the statements of operations.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP
have been condensed or omitted and as such, these Company-only financial statements should be read in conjunction with the Group’s
consolidated financial statements.

Exhibit 2.4
DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
As of December 31, 2022, GreenTree Hospitality Group Ltd. (the “company”, “we”, “us” and “our”) had the following series of
securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
Trade
symbol
Name of each exchange on which
registered
Class A ordinary shares, par value US$0.50 per share*
GHG
New York Stock Exchange
American depositary shares,
each representing one Class A ordinary share
*
Not for trading, but only in connection with the listing on the New York Stock Exchange of American depositary shares.
Description of Ordinary Shares (Items 9.A.3, 9.A.5, 9.A.6, 9.A.7, 10.B.3, 10.B.4, 10.B.6, 10.B.7, 10.B.8, 10.B.9 and 10.B.10 of
Form 20-F)
General
We are an exempted company incorporated in the Cayman Islands with limited liability and our affairs are governed by our
amended and restated memorandum and articles of association, or our articles, and the Companies Act (As Revised) of the Cayman
Islands, which we refer to as the Cayman Companies Act, and the common law of the Cayman Islands.
Each Class A ordinary share of our company has par value of US$0.50. The number of Class A ordinary shares that were issued as
of December 31, 2022 is provided on the cover of our annual report on Form 20-F for the year ended December 31, 2022.
Our amended and restated memorandum and articles of association currently effective, which we refer to as our articles, were
adopted on March 11, 2018.
The following are summaries of certain material provisions of our articles and the Cayman Companies Act insofar as they relate to
the material terms of our shares.
All of our issued and outstanding shares are fully paid and non-assessable. Our shares are issued in registered form, and are issued
when registered in our register of shareholders. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote
their shares. We may not issue shares to bearer.
Dividends
The holders of our shares are entitled to such dividends as may be declared by our board of directors. In addition, our shareholders
may by ordinary resolution declare a dividend, no dividend may exceed the amount recommended by our directors. Under the laws of the
Cayman Islands, our company may pay a dividend out of either profit or share premium account, provided that in no circumstances may
a dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business.
Voting Rights
Our share capital is currently divided into two classes of shares. Our issued and outstanding share capital consists of Class A
ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares are, on a poll,

entitled to one (1) vote per share and holders of Class B ordinary shares are, on a poll, entitled to three (3) votes per share, in respect of
all matters subject to vote at general meetings of the Company. Voting at any general meeting of shareholders is by poll.
Transfer of Shares
Subject to the restrictions set out below, any of our shareholders may transfer all or any of his or her shares by an instrument of
transfer in any usual or common form or any other form approved by our board of directors, executed by or on behalf of the transferor
and if in respect of a nil or partly paid up share, or if so required by the directors, shall also be executed on behalf of the transferee and
shall be accompanied by the certificate (if any) of the shares to which it relates and such other evidence as the directors may reasonably
require to show the right of the transferor to make the transfer. The transferor shall be deemed to remain a shareholder until the name of
the transferee is entered in the register of member in respect of the relevant shares.
Our board of directors may, in its absolute discretion, decline to register any transfer of any share that has not been fully paid up or
is on which our company has a lien. Our board of directors may also decline to register any transfer of any share unless:
·
the instrument of transfer is lodged with us, accompanied by the certificate for the shares to which it relates and such other
evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;
·
the instrument of transfer is in respect of only one class of shares;
·
the instrument of transfer is properly stamped, if required;
·
in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed
four; and
·
any fee of such maximum sum as the New York Stock Exchange may determine to be payable, or such lesser sum as the board
of directors may from time to time require, is paid to us in respect thereof.
If our directors refuse to register a transfer, they shall within two calendar months after the date on which the instrument of transfer
was lodged, send to each of the transferor and the transferee notice of such refusal.
Winding Up
On the winding up of our company, if the assets available for distribution amongst our shareholders shall be more than sufficient to
repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst our shareholders in
proportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares
in respect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for
distribution are insufficient to repay the whole of the share capital, such assets will be distributed so that, as nearly as may be, the losses
shall be borne by our shareholders in proportion to the par value of the shares held by them.
The liquidator may, with the sanction of a special resolution of our shareholders and any other sanction required by the Cayman
Companies Act, divide amongst the shareholders in species or in kind the whole or any part of the assets of our Company (whether they
shall consist of property of the same kind or not), and may for such purpose value any assets and determine how the division shall be
carried out as between our shareholders or different classes of shareholders.
We are an exempted company with limited liability incorporated under the Cayman Companies Act, and under the Cayman
Companies Act, the liability of our shareholders is limited to the amount, if any, unpaid on the shares respectively held by them. Our
memorandum of association contains a declaration that the liability of our shareholders is so limited.

Redemption, Repurchase and Surrender of Shares
We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders thereof, on
such terms and in such manner as may be determined, before the issue of such shares, by our board of directors or by special resolution
of our shareholders. Our Company may also repurchase any of our shares provided that the manner and terms of such purchase have
been approved by our board of directors or by ordinary resolution of our shareholders, or as otherwise authorized by our articles. Under
the Cayman Companies Act, the redemption or repurchase of any share may be paid out of our Company’s profits or out of the proceeds
of a new issue of shares made for the purpose of such redemption or repurchase, or out of capital (including share premium account and
capital redemption reserve) if our company can, immediately following such payment, pay its debts as they fall due in the ordinary
course of business. In addition, under the Cayman Companies Act no such share may be redeemed or repurchased (i) unless it is fully
paid up, (ii) if such redemption or repurchase would result in there being no shares outstanding or (iii) if the company has commenced
liquidation. In addition, our company may accept the surrender of any fully paid share for no consideration.
Calls on Shares and Forfeiture of Shares
Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their shares in a notice
served to such shareholders at least fourteen calendar days prior to the specified time of payment. The shares that have been called upon
and remain unpaid are subject to forfeiture.
General Meetings of Shareholders
As a Cayman Islands exempted company, we are not obliged by the Cayman Companies Act to call shareholders’ annual general
meetings. Our articles provide that we may (but are not obliged to) in each year hold a general meeting as our annual general meeting in
which case we shall specify the meeting as such in the notices calling it, and the annual general meeting shall be held at such time and
place as may be determined by our directors.
Shareholders’ general meetings may be convened by a majority of our board of directors or by our chairman. Advance notice of at
least ten calendar days is required for the convening of our annual general shareholders’ meeting (if any) and any other general meeting
of our shareholders. A quorum required for any general meeting of shareholders consists of at least one shareholder present in person or
by proxy (or, if a corporation or other non-natural person, by its duly authorised representative), together holding Shares which carry in
aggregate not less than one-third of all votes attaching to all of our shares in issue and entitled to vote at such general meeting.
The Cayman Companies Act provides shareholders with only limited rights to requisition a general meeting, and does not provide
shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles
of association. Our articles provide that upon the requisition of two or more shareholders together holding shares which carry in
aggregate not less than one-third of all the votes attaching to all issued shares of our company entitled to vote at general meetings, our
board shall convene an extraordinary general meeting and put the resolutions so requisitioned to a vote at such meeting. However, our
articles do not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary general
meetings not called by such shareholders.
Proceedings of Board of Directors
Our articles provide that, subject to the Cayman Companies Act, our articles and to any resolutions passed in a general meeting,
our business is to be managed and conducted by our board of directors. The quorum necessary for board meetings may be fixed by the
board and, unless so fixed, will be a majority of the directors then in office.
Our articles provide that the directors may from time to time at their discretion exercise all powers of our company to borrow
money, to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and issue debentures, debenture stock or
other securities of our company, whether money is borrowed or as security for any debt, liability or obligation of our company or of any
third party.

Changes in Capital
Our shareholders may from time to time by ordinary resolution:
·
increase our share capital by new shares of such amount;
·
consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;
·
sub-divide our existing shares, or any of them, into shares of an amount smaller than that fixed by our memorandum of
association, provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each
reduced share shall be the same as it was in case of the share from which the reduced share is derived; and
·
cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person
and diminish the amount of our share capital by the amount of the shares so canceled.
Our shareholders may by special resolution, subject to confirmation by the Grand Court of the Cayman Islands on an application
by our company for an order confirming such reduction, reduce our share capital or any capital redemption reserve in any manner
permitted by law.
Inspection of Books and Records
Holders of our shares have no general right under the Cayman Companies Act to inspect or obtain copies of our list of shareholders or
our corporate records (save for our articles, special resolutions of our shareholders and our register of mortgages and charges). However,
we provide our shareholders with annual audited financial statements.
Exempted Company
We are an exempted company with limited liability duly incorporated and validly existing under the Cayman Companies Act. The
Cayman Companies Act distinguishes between ordinary resident companies and exempted companies. Any company that is registered in
the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company.
The requirements for an exempted company are essentially the same as for an ordinary company except for the exemptions and
privileges listed below:
·
an exempted company does not have to file an annual return of its shareholders with the Registrar of Companies of the
Cayman Islands;
·
an exempted company’s register of members is not open to inspection;
·
an exempted company does not have to hold an annual general meeting;
·
an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually
given for 20 years in the first instance);
·
an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
·
an exempted company may register as a limited duration company; and
·
an exempted company may register as a segregated portfolio company.
“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on that
shareholder’s shares in the company (except in exceptional circumstances, such as involving

fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may be
prepared to pierce or lift the corporate veil). We are subject to reporting and other informational requirements of the Exchange Act, as
applicable to foreign private issuers. We follow home country practice for certain corporate governance practices which may differ from
the Corporate Governance Rules of the New York Stock Exchange. The listing requirements of the New York Stock Exchange require
that every listed company hold an annual general meeting of shareholders. In addition, our articles allow our directors to call
extraordinary general meetings of our shareholders pursuant to the procedures set forth in our articles.
Differences in Corporate Law
The Cayman Companies Act is derived, to a large extent, from the older Companies Acts of England, but does not follow recent
statutory enactments in England and accordingly there are significant differences between the Cayman Companies Act and the current
Companies Act of England. In addition, the Cayman Companies Act differs from laws applicable to U.S. corporations and their
shareholders. Set forth below is a summary of certain significant differences between the provisions of the Cayman Companies Act
applicable to us and the laws applicable to companies incorporated in the State of Delaware.
Mergers and Similar Arrangements
The Cayman Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman
Islands companies and non-Cayman Islands companies. For these purposes, (i) “merger” means the merging of two or more constituent
companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and (ii) a
“consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the
undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation,
the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (i) a
special resolution of the shareholders of each constituent company, and (ii) such other authorization, if any, as may be specified in such
constituent company’s articles of association. The plan must be filed with the Registrar of Companies of the Cayman Islands together
with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent
company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each
constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Court approval
is not required for a merger or consolidation which is effected in compliance with these statutory procedures.
A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a
resolution of shareholders. For this purpose a subsidiary is a company of which at least 90% of the issued shares entitled to vote are
owned by the parent company.
The consent of each holder of a fixed or floating security interest of a constituent company is required unless this requirement is
waived by a court in the Cayman Islands.
Except in certain limited circumstances, a shareholder of a Cayman Islands constituent company who dissents from the merger or
consolidation is entitled to payment of the fair value of his or her shares (which, if not agreed between the parties, will be determined by
the Cayman Islands court) upon dissenting from a merger or consolidation, provide the dissenting shareholder complies strictly with the
procedures set out in the Cayman Companies Act. The exercise of such dissenter rights will preclude the exercise by the dissenting
shareholder of any other rights to which he or she might otherwise be entitled by virtue of holding shares, except for the right to seek
relief on the grounds that the merger or consolidation is void or unlawful.
Separately from the statutory provisions relating to mergers and consolidations, the Cayman Companies Act also contains statutory
provisions that facilitate the reconstruction and amalgamation of companies by way of schemes of arrangement, provided that the
arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made,
and who must, in addition, represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are
present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and
subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting

shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to
approve the arrangement if it determines that:
·
the statutory provisions as to the required majority vote have been met;
·
the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without
coercion of the minority to promote interests adverse to those of the class;
·
the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his
interest; and
·
the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.
The Cayman Companies Act also contains a statutory power of compulsory acquisition which may facilitate the “squeeze out” of
dissentient minority shareholder upon a tender offer. When a tender offer is made and accepted by holders of 90% of the shares affected
within four months of the offer being made, the offeror may, within a two-month period commencing on the expiration of such four
month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to
the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is
evidence of fraud, bad faith or collusion.
If an arrangement and reconstruction is thus approved, or if a tender offer is made and accepted, a dissenting shareholder would
have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware
corporations, providing rights to receive payment in cash for the judicially determined value of the shares.
Shareholders’ Suits
In principle, we will normally be the proper plaintiff to sue for a wrong done to us as a company and as a general rule, a derivative
action may not be brought by a minority shareholder. However, based on English law authorities, which would in all likelihood be of
persuasive authority in the Cayman Islands, the Cayman Islands court can be expected to follow and apply the common law principles
(namely the rule in Foss v. Harbottle and the exceptions thereto) so that a non-controlling shareholder may be permitted to commence a
class action against or derivative actions in the name of the company to challenge:
·
an act which is illegal or ultra vires with respect to the company and is therefore incapable of ratification by the shareholders;
·
an act which, although not ultra vires, requires authorization by a qualified (or special) majority (that is, more than a simple
majority) which has not been obtained; and
·
an act which constitutes a “fraud on the minority” where the wrongdoers are themselves in control of the company.
Indemnification of Directors and Executive Officers and Limitation of Liability
The Cayman Companies Act does not limit the extent to which a company’s articles of association may provide for
indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be
contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our articles
provide that we shall indemnify our officers and directors against all actions, proceedings, costs, charges, expenses, losses, damages or
liabilities incurred or sustained by such directors or officer, other than by reason of such person’s dishonesty, willful default or fraud, in
or about the conduct of our company’s business or affairs (including as a result of any mistake of judgment) or in the execution or
discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the

foregoing, any costs, expenses, losses or liabilities incurred by such director or officer in defending (whether successfully or otherwise)
any civil proceedings concerning our company or its affairs in any court whether in the Cayman Islands or elsewhere. This standard of
conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation. In addition, we
have entered into indemnification agreements with our directors and executive officers that provide such persons with additional
indemnification beyond that provided in our articles.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons
controlling us under the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
Anti-Takeover Provisions in Our Articles
Some provisions of our articles may discourage, delay or prevent a change in control of our company or management that
shareholders may consider favorable, including provisions that authorize our board of directors to issue preferred shares in one or more
series and to designate the price, rights, preferences, privileges and restrictions of such preferred shares without any further vote or action
by our shareholders.
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our articles, as
amended and restated from time to time, for a proper purpose and in what they believe in good faith to be in the best interests of our
company.
Directors’ Fiduciary Duties
Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders.
This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with
the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of,
and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty
requires that a director act in a manner he or she reasonably believes to be in the best interests of the corporation. He or she must not use
his or her corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best
interests of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling
shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an
informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this
presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a
transaction by a director, a director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the
corporation.
As a matter of Cayman law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company
and therefore he owes the following duties to the company — a duty to act bona fide in the best interests of the company, a duty not to
make a profit based on his or her position as director (unless the company permits him to do so), a duty not to put himself in a position
where the interests of the company conflict with his or her personal interest or his or her duty to a third party, and a duty to exercise
powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the company a duty to
act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greater
degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, English and
Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are
likely to be followed in the Cayman Islands.
Shareholder Proposals
Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of
shareholders, provided it complies with the notice provisions in the governing documents. The Delaware General Corporation Law does
not provide shareholders an express right to put any proposal before the

annual meeting of shareholders, but in keeping with common law, Delaware corporations generally afford shareholders an opportunity to
make proposals and nominations provided that they comply with the notice provisions in the certificate of incorporation or bylaws. A
special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but
shareholders may be precluded from calling special meetings.
The Cayman Companies Act provides shareholders with only limited rights to requisition a general meeting, and does not provide
shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles
of association. Our articles allow two or more of our shareholders holding in aggregate not less than one-third of all the votes attaching to
the issued shares of our company entitled to vote at general meetings to requisition an extraordinary general meeting of our shareholders,
in which case our board is obliged to convene an extraordinary general meeting and to put the resolutions so requisitioned to a vote at
such meeting. Our articles provide no other right to put any proposals before annual general meetings or extraordinary general meetings.
As a Cayman Islands exempted company, we are not obligated by law to call shareholders’ annual general meetings. However, our
corporate governance guidelines require us to call such meetings every year.
Cumulative Voting
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s
certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority
shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a
single director, which increases the shareholder’s voting power with respect to electing such director. While there is nothing under the
laws of the Cayman Islands which specifically prohibits or restricts the creation of cumulative voting rights for the election of directors
of our company, it is not a concept that is accepted as a common practice in the Cayman Islands, and our company has made no
provisions in our articles to allow cumulative voting for election of our directors. As a result, our shareholders are not afforded any less
protections or rights on this issue than shareholders of a Delaware corporation.
Removal of Directors
Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause
with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise.
Under our articles, subject to certain restrictions as contained therein, directors may be removed by ordinary resolution of our
shareholders. A director shall hold office until the expiration of his or her term or his or her successor shall have been elected and
qualified, or until his or her office is otherwise vacated. A director’s office shall be vacated if the director (i) becomes bankrupt or makes
any arrangement or composition with his creditors; (ii) dies or is found to be or becomes of unsound mind; (iii) resigns his office by
notice in writing to the company; (iv) without special leave of absence from our board of directors, is absent from three consecutive
meetings of the board and the board resolves that his office be vacated, (v) is prohibited by any applicable law from being a director or;
(vi) is removed from office pursuant to any other provisions of our articles.
Transactions with Interested Shareholders
The Delaware General Corporation Law contains a business combination statute applicable to Delaware public corporations
whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of
incorporation or bylaws that is approved by its shareholders, it is prohibited from engaging in certain business combinations with an
“interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder
generally is a person or a group who or which owns or owned 15% or more of the target’s outstanding voting stock or who or which is an
affiliate or associate of the corporation and owned 15% or more of the corporation’s outstanding voting stock within the past three years.
This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would
not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an
interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person
becoming an interested shareholder. This

encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target’s board
of directors.
Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the
Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and
its significant shareholders, the fiduciary duties owed by our directors do require that such transactions must be entered into bona fide in
the best interests of our company and for a proper corporate purpose and not with the effect of constituting a fraud on the minority
shareholders.
Dissolution; Winding Up
Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be
approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of
directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation
to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board of
directors.
Under the Cayman Companies Act, our company may be wound up by either a special resolution of our members or, if our
company is unable to pay its debts as they fall due, by an ordinary resolution of our members. In addition, a company may be wound up
by an order of the courts of the Cayman Islands. The court has authority to order winding up in a number of specified circumstances
including where it is, in the opinion of the court, just and equitable to do so.
Variation of Rights of Shares
Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a
majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under our articles, if our share
capital is divided into different classes of shares, we may only materially adversely vary or abrogate the rights attached to any class only
with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or with the sanction of a special
resolution passed at a separate meeting of the holders of the shares of that class.
Amendment of Governing Documents
Under the Delaware General Corporation Law, a corporation’s certificate of incorporation may be amended only if adopted and
declared advisable by the board of directors and approved by a majority of the outstanding shares entitled to vote, and the bylaws may be
amended with the approval of a majority of the outstanding shares entitled to vote and may, if so provided in the certificate of
incorporation, also be amended by the board of directors. Under the Cayman Companies Act and our articles, our articles may only be
amended by special resolution of our shareholders.
Rights of Non-Resident or Foreign Shareholders
There are no limitations imposed by our articles on the rights of non-resident or foreign shareholders to hold or exercise voting
rights on our shares. In addition, there are no provisions in our articles which require our company to disclose shareholder ownership
above any particular ownership threshold.
Directors’ Power to Issue Shares
Under our articles, our board of directors is empowered to issue or allot shares (including, without limitation, preferred shares)
(whether in certificated form or non-certificated form) to such persons, in such manner, on such terms and having such rights and being
subject to such restrictions as they may from time to time determine, and to grant options with respect to shares and issue warrants or
similar instruments with respect thereto. In particular, pursuant to our articles, our board of directors has the authority, without further
approval of the shareholders, to grant rights over shares or other securities to be issued in one or more classes or series as they deem
necessary or

appropriate and determine the designations, powers, preferences, privileges and other rights attaching to such Shares or securities,
including dividend rights, voting rights, conversion rights, terms of redemption and liquidation preferences, any or all of which may be
greater than the powers, preferences, privileges and rights associated with the then issued and outstanding shares, at such times and on
such other terms as they think proper. Subject to the directors’ fiduciary duty of acting in the best interests of our company, preferred
shares can be issued quickly with terms calculated to delay or prevent a change in control of us or make removal of management more
difficult. Additionally, the issuance of preferred shares may have the effect of decreasing the market price of the shares, and may
adversely affect the voting and other rights of the holders of shares.
Description of Debt Securities, Warrants and Rights and Other Securities (Items 12.A, 12.B and 12.C of Form 20-F)
None.
Description of American Depositary Shares (Items 12.D.1 and 12.D.2 of Form 20-F)
Deutsche Bank Trust Company Americas, as depositary, registers and delivers the ADSs. Each ADS represents ownership of one
(1) Class A ordinary share, deposited with Deutsche Bank AG, Hong Kong Branch, as custodian for the depositary. Each ADS also
represents ownership of any other securities, cash or other property which may be held by the depositary. The depositary’s corporate trust
office at which the ADSs are administered is located at 60 Wall Street, New York, NY 10005, USA. The principal executive office of the
depositary is located at 60 Wall Street, New York, NY 10005, USA.
The Direct Registration System, or DRS, is a system administered by The Depository Trust Company, or DTC, pursuant to which
the depositary may register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements issued by
the depositary to the ADS holders entitled thereto.
We do not treat ADS holders as our shareholders and accordingly, you, as an ADS holder, do not have shareholder rights. Cayman
Islands law governs shareholder rights. The depositary is the holder of the ordinary shares underlying your ADSs. As a holder of ADSs,
you have ADS holder rights. A deposit agreement among us, the depositary and you, as an ADS holder, and the beneficial owners of
ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. The laws of the State of New York govern the
deposit agreement and the ADSs.
The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read
the entire deposit agreement and the form of American Depositary Receipt.
Holding the ADSs
How will you hold your ADSs?
You may hold ADSs either (1) directly (a) by having an American Depositary Receipt, or ADR, which is a certificate evidencing a
specific number of ADSs, registered in your name, or (b) by holding ADSs in DRS, or (2) indirectly through your broker or other
financial institution. If you hold ADSs directly, you are an ADS holder. This description assumes you hold your ADSs directly. ADSs
will be issued through DRS, unless you specifically request certificated ADRs. If you hold the ADSs indirectly, you must rely on the
procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult
with your broker or financial institution to find out what those procedures are.
Dividends and Other Distributions
How will you receive dividends and other distributions on the shares?
The depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or
other deposited securities, after deducting its fees and expenses. You will receive these

distributions in proportion to the number of ordinary shares your ADSs represent as of the record date (which will be as close as
practicable to the record date for our ordinary shares) set by the depositary with respect to the ADSs.
·
Cash.  The depositary will convert or cause to be converted any cash dividend or other cash distribution we pay on the 
ordinary shares or any net proceeds from the sale of any ordinary shares, rights, securities or other entitlements under the 
terms of the deposit agreement into U.S. dollars if it can do so on a practicable basis, and can transfer the U.S. dollars to the 
United States and will distribute promptly the amount thus received. If the depositary shall determine in its judgment that such 
conversions or transfers are not practical or lawful or if any government approval or license is needed and cannot be obtained 
at a reasonable cost within a reasonable period or otherwise sought, the deposit agreement allows the depositary to distribute 
the foreign currency only to those ADS holders to whom it is possible to do so. It will hold or cause the custodian to hold the 
foreign currency it cannot convert for the account of the ADS holders who have not been paid and such funds will be held for 
the respective accounts of the ADS holders. It will not invest the foreign currency and it will not be liable for any interest for 
the respective accounts of the ADS holders.
·
Before making a distribution, any taxes or other governmental charges, together with fees and expenses of the depositary, that
must be paid, will be deducted. It will distribute only whole U.S. dollars and cents and will round down fractional cents to the
nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you
may lose some or all of the value of the distribution.
·
Shares.  For any ordinary shares we distribute as a dividend or free distribution, either (1) the depositary will distribute 
additional ADSs representing such ordinary shares or (2) existing ADSs as of the applicable record date will represent rights 
and interests in the additional ordinary shares distributed, to the extent reasonably practicable and permissible under law, in 
either case, net of applicable fees, charges and expenses incurred by the depositary and taxes and/or other governmental 
charges. The depositary will only distribute whole ADSs. It will try to sell ordinary shares which would require it to deliver a 
fractional ADS and distribute the net proceeds in the same way as it does with cash. The depositary may sell a portion of the 
distributed ordinary shares sufficient to pay its fees and expenses, and any taxes and governmental charges, in connection with 
that distribution.
·
Elective Distributions in Cash or Shares.  If we offer holders of our ordinary shares the option to receive dividends in either 
cash or shares, the depositary, after consultation with us and having received timely notice as described in the deposit 
agreement of such elective distribution by us, has discretion to determine to what extent such elective distribution will be 
made available to you as a holder of the ADSs. We must timely first instruct the depositary to make such elective distribution 
available to you and furnish it with satisfactory evidence that it is legal to do so. The depositary could decide it is not legal or 
reasonably practicable to make such elective distribution available to you. In such case, the depositary shall, on the basis of the 
same determination as is made in respect of the ordinary shares for which no election is made, distribute either cash in the 
same way as it does in a cash distribution, or additional ADSs representing ordinary shares in the same way as it does in a 
share distribution. The depositary is not obligated to make available to you a method to receive the elective dividend in shares 
rather than in ADSs. There can be no assurance that you will be given the opportunity to receive elective distributions on the 
same terms and conditions as the holders of ordinary shares.
·
Rights to Purchase Additional Shares.  If we offer holders of our ordinary shares any rights to subscribe for additional shares, 
the depositary shall having received timely notice as described in the deposit agreement of such distribution by us, consult 
with us, and we must determine whether it is lawful and reasonably practicable to make these rights available to you. We must 
first instruct the depositary to make such rights available to you and furnish the depositary with satisfactory evidence that it is 
legal to do so. If the depositary decides it is not legal or reasonably practicable to make the rights available but that it is lawful 
and reasonably practicable to sell the rights, the depositary will endeavor to sell the rights and in a riskless principal capacity 
or otherwise, at such place and upon such terms (including public or private sale) as it may deem proper distribute the net 
proceeds in the same way as it does with cash. The

depositary will allow rights that are not distributed or sold to lapse. In that case, you will receive no value for them.
·
U.S. securities laws may restrict transfers and cancellation of the ADSs represented by shares purchased upon exercise of
rights. For example, you may not be able to trade these ADSs freely in the United States. In this case, the depositary may
deliver restricted depositary shares that have the same terms as the ADSs described in this section except for changes needed
to put the necessary restrictions in place.
·
There can be no assurance that you will be given the opportunity to exercise rights on the same terms and conditions as the
holders of ordinary shares or be able to exercise such rights.
·
Other Distributions.  Subject to receipt of timely notice, as described in the deposit agreement, from us with the request to 
make any such distribution available to you, and provided the depositary has determined such distribution is lawful and 
reasonably practicable and feasible and in accordance with the terms of the deposit agreement, the depositary will distribute to 
you anything else we distribute on deposited securities by any means it may deem practicable, upon your payment of 
applicable fees, charges and expenses incurred by the depositary and taxes and/or other governmental charges. If any of the 
conditions above are not met, the depositary will endeavor to sell, or cause to be sold, what we distributed and distribute the 
net proceeds in the same way as it does with cash; or, if it is unable to sell such property, the depositary may dispose of such 
property in any way it deems reasonably practicable under the circumstances for nominal or no consideration, such that you 
may have no rights to or arising from such property.
The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders.
We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any
other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that you may not receive the
distributions we make on our shares or any value for them if we and/or the depositary determines that it is illegal or not practicable for us
or the depositary to make them available to you.
Deposit, Withdrawal and Cancellation
How are ADSs issued?
The depositary will deliver ADSs if you or your broker deposit ordinary shares or evidence of rights to receive ordinary shares
with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or
fees, the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the
order of the person or persons entitled thereto.
How do ADS holders cancel an American Depositary Share?
You may turn in your ADSs at the depositary’s corporate trust office or by providing appropriate instructions to your broker. Upon
payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will
deliver the ordinary shares and any other deposited securities underlying the ADSs to you or a person you designate at the office of the
custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its corporate trust office, to the
extent permitted by law.
How do ADS holders interchange between Certificated ADSs and Uncertificated ADSs?
You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary
will cancel that ADR and will send you a statement confirming that you are the owner of uncertificated ADSs. Alternatively, upon
receipt by the depositary of a proper instruction from a holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for
certificated ADSs, the depositary will execute and deliver to you an ADR evidencing those ADSs.

Voting Rights
How do you vote?
You may instruct the depositary to vote the ordinary shares or other deposited securities underlying your ADSs at any meeting at
which you are entitled to vote pursuant to any applicable law, the provisions of our memorandum and articles of association, and the
provisions of or governing the deposited securities. Otherwise, you could exercise your right to vote directly if you withdraw the ordinary
shares. However, you may not know about the meeting sufficiently enough in advance to withdraw the ordinary shares.
If we ask for your instructions and upon timely notice from us by regular, ordinary mail delivery, or by electronic transmission, as
described in the deposit agreement, the depositary will notify you of the upcoming meeting at which you are entitled to vote pursuant to
any applicable law, the provisions of our memorandum and articles of association, and the provisions of or governing the deposited
securities, and arrange to deliver our voting materials to you. The materials will include or reproduce (a) such notice of meeting or
solicitation of consents or proxies; (b) a statement that the ADS holders at the close of business on the ADS record date will be entitled,
subject to any applicable law, the provisions of our memorandum and articles of association, and the provisions of or governing the
deposited securities, to instruct the depositary as to the exercise of the voting rights, if any, pertaining to the ordinary shares or other
deposited securities represented by such holder’s ADSs; and (c) a brief statement as to the manner in which such instructions may be
given. Voting instructions may be given only in respect of a number of ADSs representing an integral number of ordinary shares or other
deposited securities. For instructions to be valid, the depositary must receive them in writing on or before the date specified. The
depositary will try, as far as practical, subject to applicable law and the provisions of our memorandum and articles of association, to vote
or to have its agents vote the ordinary shares or other deposited securities (in person or by proxy) as you instruct.
We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the
ordinary shares underlying your ADSs. In addition, there can be no assurance that ADS holders and beneficial owners generally, or any
holder or beneficial owner in particular, will be given the opportunity to vote or cause the custodian to vote on the same terms and
conditions as the holders of our ordinary shares.
The depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting
instructions. This means that you may not be able to exercise your right to vote and you may have no recourse if the ordinary
shares underlying your ADSs are not voted as you requested.
In order to give you a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to deposited
securities, if we request the depositary to act, we will give the depositary notice of any such meeting and details concerning the matters to
be voted at least 30 business days in advance of the meeting date.
Compliance with Regulations
Information Requests
Each ADS holder and beneficial owner shall (a) provide such information as we or the depositary may request pursuant to law,
including, without limitation, relevant Cayman Islands law, any applicable law of the United States of America, our memorandum and
articles of association, any resolutions of our Board of Directors adopted pursuant to such memorandum and articles of association, the
requirements of any markets or exchanges upon which the ordinary shares, ADSs or ADRs are listed or traded, or to any requirements of
any electronic book-entry system by which the ADSs or ADRs may be transferred, regarding the capacity in which they own or owned
ADRs, the identity of any other persons then or previously interested in such ADRs and the nature of such interest, and any other
applicable matters, and (b) be bound by and subject to applicable provisions of the laws of the Cayman Islands, our memorandum and
articles of association, and the requirements of any markets or exchanges upon which the ADSs, ADRs or ordinary shares are listed or
traded, or pursuant to any requirements of any electronic book-entry system by which the ADSs, ADRs or ordinary shares may be
transferred, to the same extent as if such ADS

holder or beneficial owner held ordinary shares directly, in each case irrespective of whether or not they are ADS holders or beneficial
owners at the time such request is made.
Disclosure of Interests
Each ADS holder and beneficial owner shall comply with our requests pursuant to Cayman Islands law, the rules and requirements
of the New York Stock Exchange and any other stock exchange on which the ordinary shares are, or will be, registered, traded or listed or
our memorandum and articles of association, which requests are made to provide information, inter alia, as to the capacity in which such
ADS holder or beneficial owner owns ADS and regarding the identity of any other person interested in such ADS and the nature of such
interest and various other matters, whether or not they are ADS holders or beneficial owners at the time of such requests.
Fees and Expenses
As an ADS holder, you will be required to pay the following service fees to the depositary bank and certain taxes and
governmental charges (in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited
securities represented by any of your ADSs):
Service
   Fees
·
To any person to which ADSs are issued or to any person to
which a distribution is made in respect of ADS distributions
pursuant to stock dividends or other free distributions of
stock, bonus distributions, stock splits or other distributions
(except where converted to cash)
  
Up to US$0.05 per ADS issued
·
 Cancellation of ADSs, including the case of termination of the
deposit agreement
  
Up to US$0.05 per ADS cancelled
·
 Distribution of cash dividends
   Up to US$0.05 per ADS held
·
Distribution of cash entitlements (other than cash dividends)
and/or cash proceeds from the sale of rights, securities and
other entitlements
  
Up to US$0.05 per ADS held
·
Distribution of ADSs pursuant to exercise of rights.
   Up to US$0.05 per ADS held
·
Distribution of securities other than ADSs or rights to
purchase additional ADSs
  
Up to US$0.05 per ADS held
·
Depositary services
  
Up to US$0.05 per ADS held on the applicable record date(s)
established by the depositary bank
As an ADS holder, you will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes
and governmental charges (in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited
securities represented by any of your ADSs) such as:
·
Fees for the transfer and registration of ordinary shares charged by the registrar and transfer agent for the ordinary shares in
the Cayman Islands (i.e., upon deposit and withdrawal of ordinary shares).
·
Expenses incurred for converting foreign currency into U.S. dollars.
·
Expenses for cable, telex and fax transmissions and for delivery of securities.
·
Taxes and duties upon the transfer of securities, including any applicable stamp duties, any stock transfer charges or
withholding taxes (i.e., when ordinary shares are deposited or withdrawn from deposit).

·
Fees and expenses incurred in connection with the delivery or servicing of ordinary shares on deposit.
·
Fees and expenses incurred in connection with complying with exchange control regulations and other regulatory requirements
applicable to ordinary shares, deposited securities, ADSs and ADRs.
·
Any applicable fees and penalties thereon.
The depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the brokers
(on behalf of their clients) receiving the newly issued ADSs from the depositary bank and by the brokers (on behalf of their clients)
delivering the ADSs to the depositary bank for cancellation. The brokers in turn charge these fees to their clients. Depositary fees
payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the
depositary bank to the holders of record of ADSs as of the applicable ADS record date.
The depositary fees payable for cash distributions are generally deducted from the cash being distributed or by selling a portion of
distributable property to pay the fees. In the case of distributions other than cash (i.e., share dividends, rights), the depositary bank
charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of
the investor (whether certificated or uncertificated in direct registration), the depositary bank sends invoices to the applicable record date
ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary bank generally collects its fees
through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and
custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn
charge their clients’ accounts the amount of the fees paid to the depositary banks.
In the event of refusal to pay the depositary fees, the depositary bank may, under the terms of the deposit agreement, refuse the
requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS
holder.
The depositary may make payments to us or reimburse us for certain costs and expenses, by making available a portion of the ADS
fees collected in respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary bank agree from
time to time.
Payment of Taxes
You will be responsible for any taxes or other governmental charges payable, or which become payable, on your ADSs or on the
deposited securities represented by any of your ADSs. The depositary may refuse to register or transfer your ADSs or allow you to
withdraw the deposited securities represented by your ADSs until such taxes or other charges are paid. It may apply payments owed to
you or sell deposited securities represented by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the
depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to you any net
proceeds, or send to you any property, remaining after it has paid the taxes. You agree to indemnify us, the depositary, the custodian and
each of our and their respective agents, directors, employees and affiliates for, and hold each of them harmless from, any claims with
respect to taxes (including applicable interest and penalties thereon) arising from any refund of taxes, reduced rate of withholding at
source or other tax benefit obtained for you. Your obligations under this paragraph shall survive any transfer of ADRs, any surrender of
ADRs and withdrawal of deposited securities or the termination of the deposit agreement.
Reclassifications, Recapitalizations and Mergers
If we:
   Then:
Change the nominal or par value of our ordinary shares
  
The cash, shares or other securities received by the depositary will
become deposited securities.
Reclassify, split up or consolidate any of the deposited securities
  
Each ADS will automatically represent its equal share of the new
deposited securities.

Distribute securities on the ordinary shares that are not distributed
to you, or Recapitalize, reorganize, merge, liquidate, sell all or
substantially all of our assets, or take any similar action
  
The depositary may distribute some or all of the cash, shares or
other securities it received. It may also deliver new ADSs or ask
you to surrender your outstanding ADRs in exchange for new
ADRs identifying the new deposited securities.
Amendment and Termination
How may the deposit agreement be amended?
We may agree with the depositary to amend the deposit agreement and the form of ADR without your consent for any reason. If an
amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for
registration fees, facsimile costs, delivery charges or similar items, including expenses incurred in connection with foreign exchange
control regulations and other charges specifically payable by ADS holders under the deposit agreement, or materially prejudices a
substantial existing right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies
ADS holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to
agree to the amendment and to be bound by the ADRs and the deposit agreement as amended. If any new laws are adopted which would
require the deposit agreement to be amended in order to comply therewith, we and the depositary may amend the deposit agreement in
accordance with such laws and such amendment may become effective before notice thereof is given to ADS holders.
How may the deposit agreement be terminated?
The depositary will terminate the deposit agreement if we ask it to do so, in which case the depositary will give notice to you at
least 90 days prior to termination. The depositary may also terminate the deposit agreement if the depositary has told us that it would like
to resign, or if we have removed the depositary, and in either case we have not appointed a new depositary within 90 days. In either such
case, the depositary must notify you at least 30 days before termination.
After termination, the depositary and its agents will do the following under the deposit agreement but nothing else: collect
distributions on the deposited securities, sell rights and other property and deliver ordinary shares and other deposited securities upon
cancellation of ADSs after payment of any fees, charges, taxes or other governmental charges. Six months or more after the date of
termination, the depositary may sell any remaining deposited securities by public or private sale. After that, the depositary will hold the
money it received on the sale, as well as any other cash it is holding under the deposit agreement, for the pro rata benefit of the ADS
holders that have not surrendered their ADSs. It will not invest the money and has no liability for interest. After such sale, the
depositary’s only obligations will be to account for the money and other cash. After termination, we shall be discharged from all
obligations under the deposit agreement except for our obligations to the depositary thereunder.
Books of Depositary
The depositary maintains ADS holder records at its depositary office. You may inspect such records at such office during regular
business hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the
Company, the ADRs and the deposit agreement.
The depositary maintains facilities in the Borough of Manhattan, The City of New York to record and process the issuance,
cancellation, combination, split-up and transfer of ADRs.
These facilities may be closed at any time or from time to time when such action is deemed necessary or advisable by the
depositary in connection with the performance of its duties under the deposit agreement or at our reasonable written request.

Limitations on Obligations and Liability
Limits on our Obligations and the Obligations of the Depositary and the Custodian; Limits on Liability to Holders of ADSs
The deposit agreement expressly limits our obligations and the obligations of the depositary and the custodian. It also limits our
liability and the liability of the depositary. The depositary and the custodian:
·
are only obligated to take the actions specifically set forth in the deposit agreement without gross negligence or willful
misconduct;
·
are not liable if any of us or our respective controlling persons or agents are prevented or forbidden from, or subjected to any
civil or criminal penalty or restraint on account of, or delayed in, doing or performing any act or thing required by the terms of
the deposit agreement and any ADR, by reason of any provision of any present or future law or regulation of the United States
or any state thereof, Cayman Islands or any other country, or of any other governmental authority or regulatory authority or
stock exchange, or on account of the possible criminal or civil penalties or restraint, or by reason of any provision, present or
future, of our memorandum and articles of association or any provision of or governing any deposited securities, or by reason
of any act of God or war or other circumstances beyond its control (including, without limitation, nationalization,
expropriation, currency restrictions, work stoppage, strikes, civil unrest, revolutions, rebellions, explosions and computer
failure);
·
are not liable by reason of any exercise of, or failure to exercise, any discretion provided for in the deposit agreement or in our
memorandum and articles of association or provisions of or governing deposited securities;
·
are not liable for any action or inaction of the depositary, the custodian or us or their or our respective controlling persons or
agents in reliance upon the advice of or information from legal counsel, any person presenting ordinary shares for deposit or
any other person believed by it in good faith to be competent to give such advice or information;
·
are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made
available to holders of ADSs under the terms of the deposit agreement;
·
are not liable for any special, consequential, indirect or punitive damages for any breach of the terms of the deposit agreement,
or otherwise;
·
may rely upon any documents we believe in good faith to be genuine and to have been signed or presented by the proper party;
·
disclaim any liability for any action or inaction or inaction of any of us or our respective controlling persons or agents in
reliance upon the advice of or information from legal counsel, accountants, any person presenting ordinary shares for deposit,
holders and beneficial owners (or authorized representatives) of ADSs, or any person believed in good faith to be competent to
give such advice or information; and
·
disclaim any liability for inability of any holder to benefit from any distribution, offering, right or other benefit made available
to holders of deposited securities but not made available to holders of ADS.
The depositary and any of its agents also disclaim any liability (i) for any failure to carry out any instructions to vote, the manner in
which any vote is cast or the effect of any vote or failure to determine that any distribution or action may be lawful or reasonably
practicable or for allowing any rights to lapse in accordance with the provisions of the deposit agreement, (ii) the failure or timeliness of
any notice from us, the content of any information submitted to it by us for distribution to you or for any inaccuracy of any translation
thereof, (iii) any investment risk associated with the acquisition of an interest in the deposited securities, the validity or worth of the
deposited

securities, the credit-worthiness of any third party, (iv) for any tax consequences that may result from ownership of ADSs, ordinary
shares or deposited securities, or (v) for any acts or omissions made by a successor depositary whether in connection with a previous act
or omission of the depositary or in connection with any matter arising wholly after the removal or resignation of the depositary, provided
that in connection with the issue out of which such potential liability arises the depositary performed its obligations without gross
negligence or willful misconduct while it acted as depositary.
In addition, the deposit agreement provides that each party to the deposit agreement (including each holder, beneficial owner and
holder of interests in the ADRs) irrevocably waives, to the fullest extent permitted by applicable law, any right it may have to a trial by
jury in any lawsuit or proceeding against the depositary or our company related to our shares, the ADSs or the deposit agreement.
In the deposit agreement, we agree to indemnify the depositary under certain circumstances.
Requirements for Depositary Actions
Before the depositary will issue, deliver or register a transfer of an ADS, split-up, subdivide or combine ADSs, make a distribution
on an ADS, or permit withdrawal of ordinary shares, the depositary may require:
·
payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties
for the transfer of any ordinary shares or other deposited securities and payment of the applicable fees, expenses and charges
of the depositary;
·
satisfactory proof of the identity and genuineness of any signature or any other matters contemplated in the deposit agreement;
and
·
compliance with (A) any laws or governmental regulations relating to the execution and delivery of ADRs or ADSs or to the
withdrawal or delivery of deposited securities and (B) such reasonable regulations and procedures as the depositary may
establish, from time to time, consistent with the deposit agreement and applicable laws, including presentation of transfer
documents.
The depositary may refuse to issue and deliver ADSs or register transfers of ADSs generally when the register of the depositary or
our transfer books are closed or at any time if the depositary or we determine that it is necessary or advisable to do so.
Your Right to Receive the Shares Underlying Your ADSs
You have the right to cancel your ADSs and withdraw the underlying ordinary shares at any time except:
·
when temporary delays arise because: (1) the depositary has closed its transfer books or we have closed our transfer books; (2)
the transfer of ordinary shares is blocked to permit voting at a shareholders’ meeting; or (3) we are paying a dividend on our
ordinary shares;
·
when you owe money to pay fees, taxes and similar charges;
·
when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs
or to the withdrawal of ordinary shares or other deposited securities, or
·
other circumstances specifically contemplated by Section I.A.(l) of the General Instructions to Form F-6 (as such General
Instructions may be amended from time to time); or
·
for any other reason if the depositary or we determine, in good faith, that it is necessary or advisable to prohibit withdrawals.

The depositary shall not knowingly accept for deposit under the deposit agreement any ordinary shares or other deposited
securities required to be registered under the provisions of the Securities Act, unless a registration statement is in effect as to such
ordinary shares.
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Direct Registration System
In the deposit agreement, all parties to the deposit agreement acknowledge that the DRS and Profile Modification System, or
Profile, will apply to uncertificated ADSs upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC pursuant to
which the depositary may register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements
issued by the depositary to the ADS holders entitled thereto. Profile is a required feature of DRS which allows a DTC participant,
claiming to act on behalf of an ADS holder, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to
deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS
holder to register such transfer.

Exhibit 8.1
List of Significant Subsidiaries of
GreenTree Hospitality Group Ltd. (as of December 31, 2022)
Subsidiaries
    
Jurisdiction of
Incorporation
GreenTree Inns Hotel (China) Management, Inc.* 
PRC
Shanghai Evergreen Technology Co., Ltd.* 
PRC
GreenTree Inns Hotel (Shanghai) Management, Inc.* 
PRC
GreenTree Inns Hotel (Beijing) Management, Inc.* 
PRC
GreenTree Inns Jiangpu Hotel (Shanghai) Company Limited* 
PRC
GreenTree Inns Hotel (Changning) Management, Inc.* 
PRC
Shiruide Hotel Management (Shanghai) Co., Ltd. *
PRC
* The English name of this subsidiary has been translated from its Chinese name.

Exhibit 12.1
Certification by the Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Alex S. Xu, certify that:
1.
I have reviewed this annual report on Form 20-F of GreenTree Hospitality Group Ltd. (the “Company”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods
presented in this report;
4.
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the Company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the
period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting; and
5.
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
Company’s internal control over financial reporting.
Date: April 28, 2023
By:
/s/ Alex S. Xu
Name: Alex S. Xu
Title:
Chairman and Chief Executive Officer

Exhibit 12.2
Certification by the Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Yiping Yang, certify that:
1.
I have reviewed this annual report on Form 20-F of GreenTree Hospitality Group Ltd. (the “Company”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods
presented in this report;
4.
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the Company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the
period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting; and
5.
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
Company’s internal control over financial reporting.
Date: April 28, 2023
By:
/s/ Yiping Yang
Name: Yiping Yang
Title:
Chief Financial Officer

Exhibit 13.1
Certification by the Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the annual report of GreenTree Hospitality Group Ltd. (the “Company”) on Form 20-F for the year ended
December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Alex S. Xu, Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Date: April 28, 2023
By:
/s/ Alex S. Xu
Name:
Alex S. Xu
Title:
Chairman and Chief Executive Officer

Exhibit 13.2
Certification by the Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the annual report of GreenTree Hospitality Group Ltd. (the “Company”) on Form 20-F for the year ended
December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Yiping Yang, Chief
Accounting Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Date: April 28, 2023
By:
/s/ Yiping Yang
Name:
Yiping Yang
Title:
Chief Financial Officer

Exhibit 15.1
北京市中伦文德律师事务所上海分所
Zhonglun W&D Law Firm Shanghai Office
11/F, Tian An Center, No.338 West Nanjing Road,
 Huangpu Area, Shanghai, 200003, P.R.C.
 Tel: 86-21- 63018877 Fax: 86-21-6301 6887
Website: www.zhonglunwende.com
April 28, 2023
GreenTree Hospitality Group Ltd.
1228 Zhongshan North Road, Putuo District
Shanghai 200065,
People’s Republic of China
Dear Sir/Madam,
We are qualified lawyers of the People’s Republic of China (the “PRC”, for the purpose of this consent, excluding the Hong Kong
Special Administrative Region, Macao Special Administrative Region and the region of Taiwan) and as such are qualified to advise on
PRC laws, regulations or rules effective on the date hereof.
We are acting as the PRC counsel to GreenTree Hospitality Group Ltd. (the “Company”), a company incorporated under the laws of the
Cayman Islands, in connection with the Company’s Annual Report on Form 20-F for the year ended December 31, 2022 (the “2022
Annual Report”).
We consent to the reference to our firm under the headings “Item 3. Key Information—D. Risk Factors. —Risks Related to Doing
Business in China” and “Item 4. Information on the Company—C. Organizational Structure” in the Company’s 2022 Annual Report,
which will be filed with the Securities and Exchange Commission (the “SEC”). We also consent to the filing with the SEC of this
consent letter as an exhibit to the 2022 Annual Report.
In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated
thereunder.
Yours faithfully,
/s/ Zhonglun W&D Law Firm Shanghai Office
Zhonglun W&D Law Firm Shanghai Office

Exhibit 15.2
Certification by the Chief Executive Officer
Pursuant to Item 16I(a) of Form 20-F
I, Alex S. Xu, Chairman and Chief Executive Officer of GreenTree Hospitality Group Ltd. (the “Company”), certify that to my
knowledge following due inquiry:
(1) As of the date hereof, the directors and officers of the Company consist of: Alex S. Xu, Gregory James Karns, Bingwu Xie,
Dong (Albert) Li, Yanjie (Catherine) Zhu and Yiping Yang;
(2) None of the Company’s directors or officers are representatives of any government entity in the People’s Republic China
(the “PRC”);
(3) As of the date hereof, the following shareholders beneficially own 10% or more of the total outstanding ordinary shares of
the Company: Alex S. Xu and GreenTree Inns Hotel Management Group, Inc.;
(4) No shareholder that beneficially owns 10% or more of the total outstanding ordinary shares of the Company is controlled
by any government entity in the PRC;
(5) There are no voting, acting-in-concert or other agreements or arrangements, nomination, appointment, designation or other
rights, or material relationships, in each case between the Company or any of the aforementioned directors or officers or
shareholders on the one hand, and any person on the other hand, that could result in such person being deemed to control
the Company; and
(6) Based on the above, the Company is not owned or controlled by a government entity in the PRC.
Date:
April 28, 2023
By:
/s/ Alex S. Xu
Name: Alex S. Xu
Title:
Chairman and Chief Executive Officer